Peru’s new finance minister to focus on public investment

LIMA: In his first week as Peru’s finance minister, Kurt Burneo plans to visit the central bank board and the head of congress with a basic message: public investment must be increased to stimulate private activity.

“If the government doesn’t stimulate public investment, then we are reducing the possibilities for private investment to become more dynamic,” Burneo said in a wide-ranging interview in Lima.

“The recovery of public investment will allow fiscal policy to stop being contractive, as it has been up to now.”

Burneo took office last week under difficult circumstances: president Pedro Castillo appointed him as one of six new ministers after he rejected the resignation of prime minister Anibal Torres.

The cabinet overhaul comes as the president faces investigations by prosecutors while the opposition-led congress works on a third impeachment motion against him.

Burneo said that his first goals in office will be to promote public infrastructure projects, coordinate policy with the central bank and improve relations with congress, despite its relationship with Castillo, to prevent political disagreements from affecting the economy.

“It is simply to agree on what is going to be done for them to realise that political clashes can take a deferred toll on the economy,” said Burneo, who faces the challenging task of building enough trust with congress to get a 2023 budget approved.

The nation’s monetary policy is affecting consumption and investment, he noted.

“If the Finance Ministry is also developing a contractive fiscal policy we are in the worst of all worlds thinking about economic recovery,” Burneo said.

So, he will seek to boost coordination with the central bank board to harmonise measures of both entities and “to agree on adjustments to monetary policy”.

Peru’s central bank is independent and it’s unclear to what extent the finance minister has space to coordinate policy as argued by Burneo.

In June, it reduced its 2022 public investment estimate to 2.1% from 4%, and forecast 2023 public investment at 1.6%.