The 2020-2024 National Budget Law No. 19,924, promulgated on December 18, 2020, included a new authorization framework for Central Government indebtedness. Article 696 of this law sets a cap on Government Net Indebtedness (GNI). GNI is defined as gross indebtedness (bond market issuance and disbursed loans) net of debt amortizations and the variation of Central Government’s liquid and other financial assets, during the fiscal year. The borrowing framework also included a safeguard clause that allowed for an increase in the legal cap, which was only applicable under extraordinary circumstances (unexpected events such as natural disasters, pandemics, strong changes in relative prices, or an economic recession). When invoked, the clause allowed for up to an additional 30% increase in the baseline net indebtedness amount authorized by Congress.

The Statement of Reasons to the 2025–2029 Budget Bill, submitted to Congress, incorporates a new fiscal rule, introducing a series ofmreforms to the previous framework, in alignment with the academic literature and international best practices. This new framework ismgrounded in a dual fiscal rule featuring: (i) a medium-term net debt anchor as a percentage of GDP and (ii) operational targets, consisting of an indicative structural fiscal balance target and a legal ceiling on net indebtedness. In order to enhance consistency and predictability within fiscal planning, it has been proposed that the legal limit for net indebtedness be redefined in CPI-linked starting in 2026. There are amendments concerning the safeguard clause. The clause continues to authorize an increase of up to 30% in the net indebtedness ceiling during periods of severe economic downturn, substantial shifts in relative prices, national emergencies, or natural disasters. To invoke the safeguard clause, the Ministry of Economy and Finance must now submit a detailed report to the Autonomous Fiscal Council, and appear before the General Assembly, both within 30 calendar days following invocation. To enhance transparency during the election year, additional restrictions apply: (i) the maximum permissible increase in the debt ceiling is reduced to 20%, and (ii) the safeguard clause may only be invoked during the 30 calendar days immediately preceding the national election.

For 2020, the GNI legal limit was set at USD 3,500 million (Law No. 19,924). The actual GNI figure for that year was USD 3,113 million (for more details, see page 84 of Rendición de Cuentas 2020, in Spanish).

For 2021, the Central Government’s net indebtedness limit was originally set at USD 2,300 million. In July 2021, the government communicated to Congress the need to activate the safeguard clause, in light of the additional budgetary resources required to address the health, social and economic fallout from Covid-19. Hence, the augmented legal limit for net indebtedness in 2021 was USD 2,990 million (for more details, see the transcript of the Ministry of Economy and Finance´s presentation in Congress, in Spanish). The actual observed figure for GNI during 2022 was USD 2,563 million (for more details, see page 144 of Rendición de Cuentas 2021, in Spanish).

For 2022, the GNI legal limit was set at USD 2,100 million (Law No. 19,996, article 343) and the observed GNI figure was USD 1,860 (for more details, see page 192 of Rendición de Cuentas 2022, in Spanish).

For 2023, the GNI legal limit was set at USD 2,200 million (Law No. 20,075, article 500). In June 2023, the government communicated to Congress the need to activate the safeguard clause, in light of the additional budgetary resources required to address the current water deficit emergency, increasing the legal limit to USD 2,860 million.

The legal ceiling for net indebtedness of the Central Government for 2024 was set at USD 2.3 billion (Law No. 20,212, Article 587, dated November 6, 2023). In December 2024, the Government informed the General Assembly of its decision to invoke the legal safeguard clause, which increases the legal limit for net government indebtedness by up to 30% (to an augmented limit of up to USD 2.99 billion). Significant changes in relative prices, particularly between tradable and non-tradable goods and between retail prices and the GDP deflator, led to a greater-than-expected reduction in inflation in 2023 and 2024. The more rapid decrease in inflation drove a decline in Central Government tax revenues in 2024− compared to what was projected in the Budget Accountability Law presented to Parliament in 2023, when the legal debt ceiling for 2024 was established.

For 2025, GNI stood at USD 3,079 million, below the legal limit of USD 3,450 million (Law No. 20,416, article 7, dated July 31, 2025), without the need to invoke any escape clauses.

For 2026, the legal ceiling for net indebtedness of the Central Government is set at CPI-linked 25.115 billion (Law No. 20,446, Article 682, dated January 8, 2026), equivalent to USD 3,992 million according to the exchange rate and inflation projections used in the Statment of Motives for the Five-Year Budget Bill (2025–2029).