Colombia Sees Worst Fiscal Gap Since 2010 as Oil Revenues Vanishby
Minister says finances had worst shock in recent history
Crude price this year doesn’t allow Ecopetrol to pay dividend
Colombia’s fiscal deficit will widen this year to the most in six years as the government’s oil income disappears amid lower crude prices.
The government is targeting a 2016 budget gap of 3.9 percent of gross domestic product in its so-called medium-term financial plan, falling to 3.3 percent in 2017, Finance Minister Mauricio Cardenas told reporters in Bogota. The Finance Ministry had previously targeted a 2016 deficit of 3.6 percent of GDP.
The fall in revenue is “the biggest shock to our income that the national government has received in recent history,” Cardenas said.
Colombia’s fiscal position has deteriorated as oil income, which had accounted for nearly a fifth of its income, dwindled. The government anticipates an average oil price of $42 per barrel this year, at which level state-controlled oil company Ecopetrol SA won’t be able to pay a dividend, Cardenas said.
The government’s “fiscal rule”, or balanced budget act, allows Colombia to run bigger deficits in response to temporary shocks. The government has said it will send a tax reform bill to Congress this year in a bid to replace lost oil revenue, although it still hasn’t published details.
“This message isn’t very positive,” said Daniel Velandia, the head analyst at Credicorp Capital’s Colombia unit. “The fiscal deficit increases, and the peso bond sales increase, and there’s no certainty on the impact of the tax reform.”
The government will sell $3 billion in overseas debt in 2017 unchanged from this year, Cardenas said. The government will also raise $3 billion in multilateral loans next year, he added.
The nation will sell 33.5 trillion pesos ($11 billion) in 2017, up from 31.4 trillion this year, Cardenas said. Of this it will sell 26.2 trillion pesos in auctions next year, up from 22.6 trillion.