Peru’s recent surge in public investment has produced record-breaking figures, yet underlying structural distortions continue to undermine the efficiency, predictability and credibility of the state’s financial management. 

Between January and November 2025, the Ministry of Economy and Finance (MEF) executed PEN49.168bn ($14.6bn) in public investment—the highest level in a decade. However, this accelerated spending sits atop a system whose failures have persisted for more than a decade, revealed most starkly by the scale of unfinished and abandoned projects.

The magnitude of the problem is reflected in the latest World Bank’s Public Finance Review, presented in Lima. The institution estimates that the value of public projects already abandoned represents 17.3% of GDP, over three times the total investment executed in 2024. 

Furthermore, 65,000 projects have remained paralysed or abandoned as of June 2023, a pattern that emerged after the replacement of the former SNIP system with Invierte.pe in 2016 and intensified with subsequent regulatory relaxations in 2019. 

Project creation became so permissive that, as World Bank economist Antonio Cusato explained, it is possible to declare a project viable and begin spending within a single month.

This permissiveness has created a portfolio far larger than the state can realistically handle. Cusato noted that Peru currently holds around PEN120bn ($35.6bn) in unexecuted balances for projects already underway, despite an annual investment capacity of roughly PEN40bn ($11.9bn). 

As El Comercio reported, completing only the ongoing portfolio would require several years of investment budgets, even without adding a single new initiative. Yet more than 80% of new projects introduced between 2012 and 2023 were incorporated after the national budget had been approved, bypassing established planning procedures.

The consequences are visible across oversight indicators. Data compiled by Gestión show that 41% of active projects with modified institutional budgets failed to report physical progress in 2025, an increase from the previous year. 

Cost overruns remain pervasive: nearly 14,000 projects registered updated costs averaging 119% above their original approved budgets. Delays are significant as well, with more than 11,000 projects accumulating an average of 698 days of lag.

Meanwhile, the congressional practice of inserting supplementary directives into the annual budget has eroded fiscal predictability. El Comercio reported that in the 2025 budget cycle, Congress added 120 such provisions—its highest intervention in 15 years—shifting roughly PEN1.4bn ($416mn) towards payroll while cutting PEN1.8bn ($534.5mn) from investment. This has contributed to the increasing rigidity of public spending and diminished the MEF’s traditional role as steward of fiscal discipline.

Despite Peru’s historically low public debt relative to the region, the World Bank warns that declining financial assets—particularly the Fiscal Stabilisation Fund—combined with persistent deficits and politically-driven spending pose rising fiscal risks. 

The report also points to weaknesses in tax collection: although Peru’s statutory income tax rates exceed those of many regional peers, revenue remains among the lowest in Latin America due to high informality, exemptions and structural complexities.

Even as authorities celebrate record execution figures, the broader system remains plagued by misaligned incentives, weak supervision and politicised budgeting. As Peru approaches an electoral year with the 2026 public budget already approved, the underlying message from international observers is clear: without rebuilding the institutional links between planning, budgeting and execution, higher spending alone will not resolve the deep inefficiencies shaping the country’s public investment landscape.