Press Release No. 04/81

Press Release: IMF Staff Statement on the Conclusion of the Third Review Discussions Under Colombia's Stand-By Arrangement

April 23, 2004

The following statement was issued on April 22, 2004 in Bogotá by Robert Rennhack, the International Monetary Fund (IMF) mission chief for Colombia:

"Since arriving 10 days ago, the IMF mission has been engaged in very productive talks with the government about Colombia's economic performance and the policy outlook for 2004. These discussions are being held in the context of the third review of the Fund-supported program.

"Our overall impression is that the economy has become much less vulnerable compared with a year ago. In 2003, the government reduced the combined public sector deficit to 2.8 percent of GDP, as programmed, which lowered total public debt (including debt of the financial public sector) to about 55 percent of GDP, from 58.4 percent of GDP at end-2002. It also implemented a range of structural reforms as scheduled, especially the approval of the fiscal responsibility law and the submission of the revised budget code to congress. The central bank continued to manage monetary policy well.

"As a result, in 2003, real economic growth more than doubled to 3.7 percent, from 1.6 percent in 2002, and inflation declined to 6.5 percent. The external current account held steady at 1.8 percent of GDP, with strong growth in exports. Many indicators now point to strong confidence in Colombia's economic outlook.

"We have been working closely with the government to review the policies for 2004 within the agreed framework of the program. The outlook for 2004 is favorable, with real growth likely to pick up to 4 percent and inflation likely to remain under control. The combined public sector deficit is expected to decline to 2.5 percent of GDP, as envisaged, while the Banco de la República will continue to take the measures necessary to achieve its inflation target. The reforms of the budget code and of the pension system are expected to proceed as envisaged in the program.

"Our discussions have not yet concluded and they will continue this weekend in Washington D.C., where the Spring Meetings of the IMF are being held. We remain confident of their successful conclusion," Mr. Rennhack stated.