Statement by IMF Mission to ColombiaPress Release No. 06/49
March 10, 2006
An International Monetary Fund (IMF) staff mission led by Mr. Robert Rennhack, Division Chief in the Western Hemisphere Department, issued the following statement on March 9 in Bogotá:
"The IMF team that has been in Bogotá over the past 10 days has reached mission-level agreement with the authorities toward completing the second review under the Fund-supported program approved in April 2005.
"The economic performance in 2005 surpassed expectations, as real GDP rose by an estimated 5 percent—contributing to strong declines in unemployment and poverty—the external sector strengthened and inflation remained well under control. Fiscal policy was significantly stronger than expected, reducing gross public debt to about 48 percent of GDP.
"The outlook for 2006 remains very favorable. Real GDP is expected to rise by 4½ percent, while inflation during the year is likely to fall to the lower end of the target range of 4 to 5 percent. The external current account deficit is projected to amount to 1.6 percent of GDP, reflecting the ongoing strength of world commodity prices, especially for oil, as well as strong growth in non-traditional exports. Net capital inflows are expected to remain strong, resulting in part sustained foreign direct investment.
"In this context, fiscal policy will stay on a path to reduce gross public debt to 40 percent of GDP by 2010. In 2006, the government will target a CPS of [1.6] percent of GDP, below the original target of 2.0 percent of GDP, and will propose to strengthen fiscal policy further in 2007 budget to be presented to congress in July. The Banco de la Republica remains fully committed to achieving its inflation target for 2006 and to reducing annual inflation further to the range of 2 to 4 percent over the medium term. The government will intensify structural reforms during the year, especially in the areas of tax policy, the system of intergovernmental transfers and the financial sector.
"In the coming days, the mission will secure the approval of Fund management for the proposed program, with the Executive Board of the Fund expected to consider the second review in May, 2006."