Colombia’s Finance Ministry (Minhacienda) head Mauricio Cardenas said Tuesday at Bogotá’s Bloomberg Conference that the government will propose a national budget of “Intelligent Austerity”—belt tightening in public sector spending, and supporting private sector growth into a larger portion of the economy.
“Intelligent austerity means realizing an adjustment in spending, with a priority on the social and support for the private sector to spur growth. We have a fiscal rule which mandates that we ‘tighten the belt’ and use all methods to make an orderly transition, without traumas,” said Cardenas.
“Fortunately, we saved an important part of the petroleum bonanza in the past. These are the resources that we have in the FAEP (Acronym in Spanish for Colombia’s ‘Petroleum Savings & Stabilization Fund), and in FONPET (National Territorial Entity Pension Fund), and fortunately we hold that in dollars, so with the devaluation, they hold more pesos. This gives us a cushion with which we can continue regional development,” continued Cardenas.
We have a goal that is not easy, but that will guide us. To improve our credit rating from BBB to BBB+, and also that by 2018 Colombia is a member of the OECD.
The finance minister explained that the government’s economic achievements are thanks to the application of a virtuous cycle based in fiscal responsibility, low interest rates, greater investment, and a resulting growth in tax revenues. “The private sector is going to the markets for investment; the government is not indebting itself. One of my biggest satisfactions is that three of our concessionaries (large government contractors) have told me that they have closed financing on their 4G (national highway system expansion) projects with international banks.”
“To counteract the external shock caused by low petroleum prices, we have activated ‘PIPE 2.0’ (Productivity & Employment Stimulation Plan) to help stir the economy and feed its growth,” said Cardenas, referring to the second phase of Colombia’s economic stimulation program. “We have a goal that is not easy, but that will guide us. To improve our credit rating from BBB to BBB+, and also that by 2018 Colombia is a member of the OECD. That means adopting best practices in every area of public policy.”