According to the Reuters agency, which replicated statements by Renzo Merino, senior vice president and principal analyst at Moody’s for Colombia, during a panel at an event in Bogotá, “we are in a macroeconomic context that is bringing us closer to the downward scenario that could take us to a change in the stable perspective we currently have.”
For Merino, it is essential to know the figures and forecasts provided by the Medium-Term Fiscal Framework, which must be made public on the 15th, to evaluate the Government’s debt.
With this report, it will be known if this setback will be temporary or if debt levels will erode even more in the coming years.
Lower growth
In that same sense, among the points that will be evaluated by the rating agency, it is the lowest economic growth that Colombia has had both in 2023 (0.6%) and so far in 2024 and also with the $20 billion cut in the General budget.
Merino pointed out that “there are other issues in the current context, such as lower growth and some problems in budget planning on income, which are creating a much more complicated physical situation.”
He specified that “we are in a macroeconomic context that is leading us to review downwards, which could lead to a change in the stable outlook that we currently have. The issue for us is the commitment to reducing the deficit.”
In this regard, the sovereign risk analyst assured that they are waiting for the national government to deliver the Medium-Term Fiscal Framework, in which new macroeconomic projections will be delivered, the most anticipated being the behavior of the debt and compliance with the fiscal rule.
“For us, here is the Administration’s commitment to the fiscal rule and that is why we will be very attentive to the resolution of the fiscal framework,” he added.
Trend
He added that “what we want to analyze is whether this deterioration trend is going to reverse or stabilize after 2024 or if we could see greater deteriorations in the coming years. That is the focus of our analysis.”
He argued that the level of debt that Colombia currently has is aligned with its peers, so care must be taken not to increase it.
Reuters indicates that Moody’s expects the country’s debt levels to increase, both in charge and interest, both in 2024 and in subsequent years. Therefore, they expect a higher “deficit” and that the goal of 5.3% for this year will be adjusted.
The expert also emphasized a policy of counterweights that has helped the country in the development of public policy debates and the commitment of various institutions to compliance with the fiscal rule. However, in this section he warned that, if a transformation of the erroneous fiscal rule is prioritized, it would also be a measure to impact the credit profile.
“If we saw that there was a new policy stance, where the fiscal rule, with the parameters of the fiscal rule, would not be complied with, and that would entail this fiscal deterioration, that would also be an important factor of negative pressure for the profile.” credit,” Merino pointed out.
