The IMF says “hmmmm”
The purpose of the IMF’s flexible line of credit is to help countries with generally sound fundamentals meet balance of payments needs, and boost market confidence during periods of heightened market risk. That is, it was created as a “spare tire” or a bumper to help eligible countries navigate temporary bumps. Colombia received a $10.5 billion FCL in 2009. Since then, the facility has been extended uninterruptedly, with the latest two-year approval in April 2024.
No funds have been drawn on the FCL to boost international reserves, but during COVID-19, when FCL uses were enlarged to finance the government’s budgetary response to the pandemic, the former Iván Duque administration drew $5.4 billion (SDR 3.75 billion). Part of this obligation has already been repaid, prompting harsh complaints from President Gustavo Petro, and many a Finance Ministry official. But the IMF (as everyone else with some sense of economic prudence) is becoming increasingly concerned about Colombia’s fiscal outlook.
This is, in our opinion, what is keeping the Article IV consultation from completion; the IMF does not buy into the Finance Ministry’s 5.1% of GDP 2025 deficit target, and surely has concerns about 2026. On April 26th the IMF issued a statement saying that “Colombia’s continued qualification for the (…) FCL is contingent on the completion of both the ongoing Article IV consultation and a subsequent FCL review.” In short, Colombia’s access to the FCL is frozen.
Finance Ministry officials claim the Article IV consultation is taking extra time just because there’s a new minister. There is, of course, much more to it than that. Colombia lacks a credible fiscal story.
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