SANTIAGO, CHILE — When José Antonio Kast won Chile’s presidency in December with 58% of the vote, one of his most repeated promises was fiscal discipline as a governing principle — a commitment to hand the next government in 2030, a balanced budget. Three months into office, that promise is gone.
In a decree published on June 9, the Kast government formally set a different fiscal goal: not balance, but a deficit shrinking gradually to about 1.5% of GDP by 2030.
Finance Minister Jorge Quiroz said he aimed to reduce the deficit progressively from 3.6% last year to 1.5% in 2030 — a significant retreat from Kast’s campaign promise to balance the budget by slashing public spending by $4 billion.
The announcement landed on the same day students were back in Santiago’s streets protesting his austerity agenda. The timing was not lost on anyone.
What Kast Inherited — and What He Promised
In his first annual address before Congress, Kast denounced that his administration received a preliminary structural fiscal deficit of 3.6% of GDP — more than double the 1.6% committed to by the outgoing Boric government — and characterized the situation as an economic emergency requiring urgent measures.
“We inherited a country with the accounts in disarray, and our obligation is not to complain, but to order them,” Kast said.
The government’s case against the Boric administration’s fiscal legacy has some merit. Finance Minister Quiroz denounced that the report released at the end of 2025 by the Boric administration contained errors and inconsistencies in the projection of gross public debt. Non-mining tax collections and lithium revenues both came in below expectations, punching holes in the budget that spending cuts alone cannot fill.
But the gap between what Kast inherited and what he promised to deliver has now been formalized in a legally binding fiscal decree — and the markets, the opposition, and the students in the streets are all taking note.
The Debt Picture
The fiscal retreat is not merely a political embarrassment. It reflects a structural challenge that goes beyond any single government’s spending decisions.
Central government debt has climbed to roughly 41 to 42 percent of GDP — dangerously close to the government’s own prudential ceiling of 45%. The 2024 fiscal deficit ballooned to 2.9% of GDP, against a government target in the range of 1.9 to 2 percent. Missing your own deficit target by nearly a full percentage point of GDP is not a rounding error.
The new government has responded by seeking congressional approval for an additional $6.2 billion in debt issuance — on top of an already-planned $17.4 billion in debt sales. The 45% debt ceiling was designed as a line in the sand — a level that Chile’s own policymakers identified as the outer boundary of fiscal safety. With debt already at 41 to 42 percent and deficits running above target, breaching that ceiling within the next several years has become a baseline risk in analysts’ projections.
Chile has historically enjoyed some of the strongest sovereign ratings in Latin America, but those ratings were built partly on fiscal credibility — and credibility, once questioned, is difficult to rebuild.
Three Months of Austerity — and Its Costs
Since taking office three months ago, Kast has cut spending across the government and ended fuel price subsidies, leading to spiraling costs at the pump. The budget cuts have eaten into support for the ultra-conservative lawyer, whose approval rating fell from 57% at his inauguration to 43% in a recent Cadem poll.
The president defended the cuts implemented during his first 82 days in office, describing them as measures of containment and efficiency that have generated savings of more than 1.3 trillion Chilean pesos — approximately $1.46 billion. The initiative is part of his campaign commitment to a $6 billion fiscal adjustment over eighteen months.
The math, however, does not work. Past budget negotiations reveal the formidable resistance Kast faces. In 2025, the government initially proposed a 2.7% public spending hike, which Congress ultimately trimmed to 2%. In 2024, the increase was 3.5%. These figures illustrate a pattern of negotiated spending increases — not cuts. The social ministries — health, education, housing, and labor — have been the primary drivers of that spending growth, and they are precisely the areas where Kast’s cuts have triggered the most visible resistance.
What the Retreat Means
For now, the government has chosen to set expectations it believes it can actually meet, and the market will judge it on whether it does. The new target — a 1.5% structural deficit by 2030 — is achievable in theory. Whether it is achievable in practice depends on economic growth recovering toward Kast’s stated goal of 4% annually, his tax mega-reform passing through a Congress where he lacks a majority, and social resistance to austerity measures remaining manageable.
None of those conditions are guaranteed. Congress is debating a sweeping reform bill which the government says will drive growth, mainly by lowering corporate taxes. The bill faces significant opposition in the Senate. Kast’s approval has already fallen 14 percentage points in three months. And the students who filled Santiago’s streets last week — the same generation that brought down Piñera’s government in 2019 — are watching the fiscal retreat closely.
The broader regional significance is also not lost on Latin American investors and analysts. Kast’s Chile was supposed to be the proof of concept — the demonstration that a right-wing government in South America could deliver fiscal discipline, economic growth, and political stability simultaneously.
Chile’s most right-wing government since the 1973 to 1990 military dictatorship has now retreated from its signature economic promise in its first quarter in office.
The question is no longer whether Kast can balance Chile’s books by 2030. It is whether his government can maintain enough political credibility — and enough fiscal space — to avoid the kind of social rupture that has ended Chilean governments before.
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