BOGOTA (Reuters) – It is “highly uncertain” whether Colombia’s government will meet its deficit target of 6.1% of gross domestic product this year, Finance Minister Alberto Carrasquilla said on Thursday, due to spending needed to deal with economic fallout from the coronavirus pandemic.
The country’s Fiscal Rule Advisory Committee widened the government deficit limit for 2020 to 6.1% of GDP earlier this month – or about 60 trillion pesos ($15.7 billion) – from 4.9% previously and 2.2% preceding that.
The government of President Ivan Duque has earmarked billions in aid for businesses and increased spending for welfare programs to lessen the impact of a two-month coronavirus quarantine.
The government expects the economy to contract 5.5% this year.
“Whether we think it will be met or not will be discussed when we do the mid-year revision of fiscal targets, but I’ll tell you it’s highly uncertain because we don’t know how long we’ll need to implement these programs,” Carrasquilla said during a virtual presentation.
Economic target revisions, usually released in June, will be delayed until the end of July, he said.
The government has designated 30 trillion pesos to respond to the coronavirus crisis and another 30 trillion in credit guarantees, Carrasquilla said.
“This 30 trillion that we have spent up to now and probably more that we will spend in future, are temporary,” he said, adding he is not worried about increasing the country’s debt, which was equivalent to about 50% of GDP before the crisis.
“We will end the year with debt indexes at their highest in history … that 50% will rise to 60% or more, first because growth will be negative but also because of these temporary spending initiatives.”
After the crisis is over, debt adjustment will take place via austerity, spending cuts and changes to taxes, Carrasquilla added.
(Reporting by Carlos Vargas; Writing by Nelson Bocanegra and Julia Symmes Cobb; Editing by Bernadette Baum)