Press Release: IMF Approves Three-Year Extended Fund Facility for Colombia

IMF News, December 20, 1999

Source details

Canonical URL

Press Release: IMF Approves Three-Year Extended Fund Facility for Colombia

Other formats

• Markdown version
• Structured JSON version
• Bundle manifest

Bibliographic details

• Published: December 20, 1999

Approval and purpose

• The International Monetary Fund approved a three-year credit for Colombia equivalent to SDR 1.957 billion (about US$2.7 billion) under the Extended Fund Facility (EFF) to support the government's economic reform program for 1999-2002.
• The EFF repayment terms: 10 years with a 4 ½-year grace period; the interest rate, adjusted weekly, is currently about 4.30 a year.1

Executive Board commentary (Stanley Fischer)

• Recent deterioration in Colombia's economic performance attributed to weak fiscal policies, adverse external shocks, and a difficult internal security situation.
• Directors commended recent corrective measures and endorsed the medium-term economic program.
• Critical policy emphases:
  • Substantial fiscal consolidation.
  • Acceleration of structural reform agenda, with higher priority on restructuring the financial sector.
  • Pursuit of a flexible exchange rate policy.
• Fiscal-strengthening prerequisites identified:
  • Tight spending policies.
  • Strong tax enforcement.
  • Improved control of resources under the fiscal decentralization system.
  • Economic recovery.
• Directors welcomed incorporation of new social safety net programs to help protect gains in social spending.
• Floating the peso was considered appropriate; under the floating exchange rate regime, central bank intervention limited to achieving balance of payment objectives and maintaining orderly market conditions.
• Expectation that inflation targeting will increasingly provide the nominal anchor with the shift to a floating exchange rate.
• Financial sector restructuring measures highlighted:
  • Deal with public bank problems through recapitalization and divestment.
  • Recapitalize viable private banks.
  • Provide relief to the mortgage sector.
• Fiscal cost of these financial sector operations has been included in the program.

Program objectives and macroeconomic framework

• Program objectives: restore economic growth, reduce inflation further, and achieve a sustainable external position.
• Key program components: strong fiscal consolidation, financial sector restructuring, structural reforms, flexible exchange rate policy.
• Growth and inflation targets:
  • Restore real GDP growth to 3% in 2000 and nearly 5% by 2002.
  • Inflation declining from 10% to 6% respectively.
• External position:
  • External current account deficit expected to increase somewhat in 2000 to 2.4% of GDP, then stabilize subsequently at just above 3% of GDP.
  • Maintain Colombia's external debt (public and private) at 43-44% of GDP.
• Under the floating exchange rate regime, central bank will intervene only to meet the targeted increase in net international reserves (NIR) and to maintain orderly market conditions.

Fiscal program and social protection

• Fiscal target for 2000: reduction in the nonfinancial public sector (NFPS) deficit to 3.6 percent of GDP from an estimated 6.3 percent in 1999.
• Fiscal consolidation built on:
  • Tight wage policy.
  • Strong tax enforcement.
  • Improved control of resources under fiscal decentralization.
  • Economic recovery.
• Structural reform agenda includes:
  • Strengthen finances of territorial governments.
  • Streamline the revenue sharing system.
  • Reform public pension systems.
  • Downsize the public sector, mainly through privatization.
  • Reform the tax system.
• While reducing public sector spending relative to GDP, introduce new social safety net programs to preserve gains in social spending.

Selected economic and financial indicators (highlights from table)

• Real GDP (percentage changes): 1995: 5.2; 1996: 2.1; 1997: 3.2; 1998: 0.4; 1999: -3.5; 2000: 3.0; 2001: 3.8; 2002: 4.8.
• GDP deflator: 1995: 18.9; 1996: 16.9; 1997: 17.0; 1998: 16.7; 1999: 11.6; 2000: 11.5; 2001: 8.8; 2002: 7.0.
• Consumer prices (average): 1995: 20.9; 1996: 20.8; 1997: 18.5; 1998: 18.7; 1999: 11.3; 2000: 11.2.
• Consumer prices (end of period): 1995: 19.5; 1996: 21.6; 1997: 17.7; 1998: 11.0; 1999: 10.0; 2000: 8.0; 2001: 6.0.
• Exports (f.o.b., percent change): 1995: 16.2; 1996: 4.0; 1997: 10.1; 1998: -5.8; 1999: 8.9; 2000: 9.2; 2001: 1.1.
• Imports (f.o.b., percent change): 1995: 16.5; 1996: -0.6; 1997: 12.8; 1998: -5.2; 1999: -29.8; 2000: 20.2; 2001: 4.2; 2002: 3.9.
• Export volume: 1995: 2.5; 1996: -2.3; 1997: 6.6; 1998: 5.4; 1999: 5.1; 2000: 2.2; 2001: 4.1.
• Import volume: 1995: 2.0; 1996: 21.7; 1997: -1.4; 1998: -28.9; 1999: 18.4; 2000: 1.7.
• Central administration revenue (percent of GDP): 1995: 23.9; 1996: 23.0; 1997: 27.9; 1998: 9.8; 1999: 20.7; 2000: 19.2.
• Central administration expenditure (percent of GDP): 1995: 38.0; 1996: 36.0; 1997: 24.3; 1998: 20.4; 1999: 5.7; 2000: 12.6; 2001: 9.0.
• Broad money (percent change): 1995: 27.3; 1996: 30.0; 1997: 24.5; 1998: 10.3; 1999: 18.2; 2000: 14.4; 2001: 13.1.
• Private sector credit (percent change): 1995: 30.5; 1996: 8.2; 1997: 14.1; 1998: 15.7.
• Interest rate (90-day time deposits) — Nominal: 1995: 32.4; 1996: 27.8; 1997: 33.9. Real: 1995: 10.8; 1996: 5.3; 1997: 14.7.
• Central administration balance (percent of GDP): 1995: -2.8; 1996: -7.1; 1997: -5.0; 1998: -4.2.
• Public sector savings (percent of GDP): 1995: 6.3; 1996: 5.8; 1997: 4.4; 1998: 5.6.
• Nonfinancial public sector balance (percent of GDP): 1995: -0.8; 1996: -2.4; 1997: -3.7; 1998: -3.9; 1999: -6.3; 2000: -3.6; 2001: -2.5; 2002: -1.5.
• Combined public sector balance (percent of GDP): 1995: -3.8; 1996: -3.1; 1997: -5.9; 1998: -1.3.
• Foreign financing (percent of GDP): 1995: 1.2; 1996: 0.9; 1997: 0.6; 1998: 1.9; 1999: 1.4; 2000: 1.3; 2001: 1.0.
• Public sector debt (percent of GDP): 1995: 26.3; 1996: 24.6; 1997: 24.2; 1998: 27.5; 1999: 34.2; 2000: 34.1; 2001: 33.8; 2002: 34.0.
• Gross domestic investment (percent of GDP): 1995: 25.8; 1996: 22.2; 1997: 21.0; 1998: 19.6; 1999: 15.3; 2000: 22.0.
• Gross national savings (percent of GDP): 1995: 17.3; 1996: 15.5; 1997: 13.7; 1998: 14.0; 1999: 16.0; 2000: 17.9; 2001: 18.8.
• Current account (deficit -) (percent of GDP): 1995: -4.9; 1996: -5.5.
• External debt (percent of GDP): 1995: 31.6; 1996: 31.5; 1997: 35.8; 1998: 41.1; 1999: 43.1; 2000: 43.6; 2001: 44.3.
• Total short-term external debt to reserves: 1995: 49.9; 1996: 47.8; 1997: 52.7; 1998: 72.0; 1999: 57.2; 2000: 66.4; 2001: 58.4.
• External debt service (percent of exports of goods, services and income): 1995: 22.9; 1996: 24.0; 1997: 23.2; 1998: 22.6; 1999: 21.1; 2000: 27.4.
• Interest payments (percent of exports of goods, services and income): 1995: 8.7; 1996: 7.9; 1997: 8.4; 1998: 9.3; 1999: 7.1; 2000: 9.4; 2001: 6.9.
• Overall balance of payments (in millions of U.S. dollars): 1995: 1; 1996: 1,722; 1997: 211; 1998: -1374; 1999: -750; 2000: 744; 2001: 326; 2002: 323.
• Gross official reserves (in millions of U.S. dollars): 1995: 8,447; 1996: 9,938; 1997: 9,908; 1998: 8,741; 1999: 8,215; 2000: 9,458; 2001: 9,784; 2002: 10,107.
• Gross official reserves (in months of imports of goods and services): 1995: 5.5; 1996: 6.2; 1997: 5.9; 1998: 5.9.

Country IMF membership and quota

• Colombia is an original member of the IMF; its quota is SDR 774 million (about US$1,063 million); and it has no outstanding use of IMF credit.

Source: Press Release No. 99/63 — IMF Approves Three-Year Extended Fund Facility for Colombia (December 20, 1999).

References

• Colombia and the IMF
• Press Releases
• PRESS CENTER
• https://www.imf.org/en/home