Declaring an economic emergency, what would this mean for Colombia?: “It is somewhat irresponsible”

Declaring an economic emergency, what would this mean for Colombia?: “It is somewhat irresponsible”
Declaring an economic emergency, what would this mean for Colombia?: “It is somewhat irresponsible”

Gustavo Petro stated that if the law that allows him to increase the debt quota is not approved, this would cause him to have to declare an economic emergency or stop paying the country’s external debt – credit Infobae

A publication by President Gustavo Petro in X caused a nationwide response. This is because the president assured that if the law that allows him to increase the debt quota is not approved, he will be forced to stop paying the country’s debt or declare an economic emergency.

Outside of the positions expressed by different political figures in the country, the question spread among citizens: what would it mean to declare an economic emergency? And how would it affect ordinary citizens?

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In dialogue with Infobae Colombiathe professor of the International School of Economic and Administrative Sciences (EICEA) of the University of La Sabana, Giovani Hernández, explained in detail what it would represent for the country if the declaration of economic emergency is registered.

First of all, Hernández stated that An economic emergency is normally declared in situations totally different from those currently registered in Colombia..

“It is an adverse situation that is not foreseen or could not be foreseen, this simply generates a significant impact on a country, for example, a significant drought that can bankrupt many people, like the one that occurred in Mocoa, that can generate an economic emergency is declared,” he indicated.

The president affirmed that if the law that can increase the debt limit is not approved, he will declare an economic emergency – credit API/Presidency

Given this, the economist indicated that the fundamental thing is not the declaration, but the consequences that it generates, since all the economic work of the country would have to focus on solving the reason why the president indicates that an emergency exists.

“When the president declares an economic emergency, the consequences must quickly generate actions that seek to mitigate the emergency and usually they have to be quick, making decisions have to be given to solve only the emergency”.

Regarding what increasing the debt ceilings represents, Hernández indicated that it could be something negative for the country and that Colombians would be the main affected, this without taking into account how it leaves the image of the country in front of potential investors.

“If it begins to increase, basically what is allowed is more debt for a country that is already in debt, It is as if a family that is already at the debt limit seeks to take out a higher debt and when the ceilings are raised, what we do is put Colombia into more debt, put Colombians into more debt.”

The economist affirmed that increasing Colombia’s debt quota would be an irresponsible decision by the president – credit Colpresa

If the president’s request is met, the economist indicated that it would represent a negative message, since it would cause the lack of trust in the institutions to increase.

It is going to generate economic instability, it is not well seen to change the fiscal rules, a fiscal rule is like a good faith contractin which I say that I commit to having this level of debt and if I start to make the promise I lose credibility, in a democratic world it is as if there is no trust in the institutions,” Hernández declared to Infobae Colombia.

Finally, Hernández indicated that increasing Colombia’s debt would be a “somewhat irresponsible” decision, since there is no certainty that what is requested can be paid later.

“I don’t know if it is the best option, what is clear is that with the possible technical restriction and the stagnant economy there is no money to generate the money needed for the functioning of the State. The quick way is to ask for debt and from there look for the money. If you ask me, That is somewhat irresponsible, because that means asking for debt today for the future, trying to pay it without knowing where from.”.

 
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