BOGOTA (Reuters) – Colombia needs a more durable fiscal adjustment to meet its financial targets, the International Monetary Fund said on Friday, adding that the country’s central bank should increase reserves to protect against external shocks.
Hamid Faruqee, chief of the IMF’s mission to Colombia, highlighted recent improvements in tax collection and spending efficiency.
But in remarks to reporters, after the IMF trimmed its growth forecast for Colombia to 3.4% this year from a previous forecast of 3.5% in January, Faruqee said the Andean country should seek to further reduce public debt as a percentage of gross domestic product.
Debt-reduction measures can include removing regimes that favor certain sectors and expanding the taxpayer base, Faruqee said, adding that measures should be taken to protect the vulnerable.
Faruqee said external risks facing Colombia had increased, citing commodity price declines, growing global trade tensions and the outbreak of coronavirus among other concerns.
“We encourage the central bank to consider restarting reserve accumulation when the conditions allow it, to help maintain its reserve coverage as a buffer against external shocks,” Faruqee said.
During the central bank’s 2019 program to build up foreign reserves it acquired $2.8 billion.
Colombia has a flexible $11.4 billion credit arrangement with the IMF that it can use to counter external shocks.
(Reporting by Carlos Vargas, Nelson Bocanegra and Oliver Griffin; Writing by Oliver Griffin; Editing by Tom Brown)