## Colombia: Staff Concluding Statement of the 2022 Article IV Mission

_IMF News, February 15, 2022_

## Source details

**Canonical URL:** [Colombia: Staff Concluding Statement of the 2022 Article IV Mission](https://www.imf.org/en/news/articles/2022/02/15/colombia-staff-concluding-statement-of-the-2022-article-iv-mision)

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## Bibliographic details
- Published: February 15, 2022

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### Overview and near-term outlook
- Colombia rebounded strongly in 2021, driven by private consumption; the economy is expected to expand by 4½ percent in 2022 with above-trend growth led by household consumption.
- Recovery characteristics:
  - Among the fastest recoveries in the region.
  - Job recovery has lagged the activity rebound.
  - A consumption-led recovery widened the external deficit.
  - Higher food and commodity prices and supply bottlenecks have pushed inflation up.
- Vaccination and pandemic context:
  - Vaccination progress has reached 64 percent of population.
  - New variants and potential renewed containment measures remain downside risks.
  - Inflation reached almost 7 percent in January.

### Risks to the outlook
- Pandemic-related uncertainty and supply chain disruptions.
- Vulnerability to a sharp rise in global risk premia given higher external financing needs from a wider current account deficit.
- Political uncertainty around upcoming elections.
- Slower implementation risks for the infrastructure agenda and the peace accord.

### Public finances — recent developments and policy direction
- Fiscal trajectory and recent performance:
  - Government financial plan for 2022 foresees a lower fiscal deficit of -6.2 percent of GDP (versus -7 percent of GDP in the medium-term fiscal framework).
  - A narrower-than-anticipated fiscal deficit in 2021 and effective unwinding of pandemic support measures put public debt on a downward trajectory in 2021 — three years earlier than previously expected.
- Policy guidance:
  - Added fiscal revenue from higher-than-expected GDP and tax collections should be saved.
  - Consider further targeting and phasing out of exceptional pandemic measures (including public loan guarantees).
  - Strong, independent oversight by the new Autonomous Fiscal Rule Committee (CARF) is important to guide deficit reduction goals and meet targets, including in 2022.
- Revenue and spending reform priorities:
  - Further raising revenues durably by an additional 1 – 1 ½ percent of GDP over the medium term would be desirable.
  - Revenue mobilization should reduce tax distortions and loopholes, increase progressivity, improve fairness, and protect poorer households with compensating measures where needed.
  - Complementary spending-efficiency measures: better utilize the social benefit system (SISBEN IV), build a new social registry to better identify recipients, implement energy subsidy reforms, and improve public procurement.
- Noted reforms and institutions:
  - Social Investment Law (SIL) is a step toward a structural balance rule with a new debt anchor.
  - DIAN modernization expected to contribute to revenue gains.

### Monetary policy and external buffers
- Monetary policy stance:
  - Accelerated monetary tightening by the central bank is appropriate to control rising consumer prices and prevent second-round effects from supply-side factors.
  - Added steps to raise interest rates in the first half of the year are recommended to tighten monetary and financial conditions and guide inflation lower.
  - Clear communication of monetary policy decisions and balance of risks is important to guide market expectations.
- External buffers:
  - International reserve accumulation over time should continue to maintain reserve adequacy and insure against external liquidity risks.
  - The IMF’s Flexible Credit Line (FCL) provides additional external buffers and enhances market confidence.

### Financial sector resilience and supervision
- System health:
  - Banks withstood the pandemic well; the financial system remains sound.
  - Loan forbearance measures (including the Programa de Acompañamiento a Deudores (PAD)) have been phased out.
  - Banks exhibit strong capital and liquidity buffers; operational profitability has recovered.
  - Basel III implementation continues on track and banks have further strengthened capital adequacy.
- Supervisory and regulatory enhancements:
  - The IMF’s FSAP finds considerable strengthening of the regulatory and supervisory system since 2012.
  - Further improvements possible in data availability, institutional arrangements for bank resolution, and macroprudential frameworks.
  - With an upswing in credit, continued close monitoring of riskier loans is important to ensure household and corporate leverage do not become excessive.

### Structural reforms for inclusive, job-rich growth
- Labor market and social protection:
  - Lowering barriers to firm and labor formalization would help reduce structural unemployment and enhance productivity.
  - The Social Protection Floor (SPF) grants access to social security benefits for nearly 10 million workers earning less than minimum wage.
  - The Temporary Protection Status (TPS) program for Venezuela migrants should strengthen integration and raise Colombia’s economic potential.
  - Retain cash transfers for families but move to more targeted delivery to sustain support for the most vulnerable.
- Green recovery and climate policy:
  - Pursuing a green recovery is a key pillar of the Compromiso por Colombia plan and the Carbon Neutrality and Climate Resilience Law.
  - The launch of sovereign green bonds and new environmental taxes can support investment in climate-related areas.

### Key policy priorities — concise list
- Consolidate fiscal gains and aim for a sustained reduction in the fiscal deficit consistent with the medium-term fiscal framework and SIL objectives.
- Mobilize additional revenue of 1 – 1 ½ percent of GDP over the medium term while protecting poorer households through compensatory measures.
- Continue accelerated monetary tightening early in the year to contain inflation and anchor expectations.
- Maintain and build external buffers, including international reserves and the FCL.
- Strengthen financial supervision, data, bank resolution arrangements, and macroprudential tools; monitor credit quality closely.
- Advance structural reforms: labor and firm formalization, targeted social protection delivery (SISBEN IV, social registry), TPS integration, energy subsidy reform, public procurement improvements, and green recovery initiatives (sovereign green bonds, environmental taxes).

*Staff Concluding Statement of the 2022 Article IV Mission, February 15, 2022*

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## References

- [Colombia and the IMF](http://www.imf.org/external/country/COL/index.htm)
- [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)
- [Mission Concluding Statements](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2022/02/15/colombia-staff-concluding-statement-of-the-2022-article-iv-mision_