COLOMBIA ACCEPTS $3 BILLION LIFELINE FROM IMF.
Colombian Finance Minister Juan Camilo Restrepo said yesterday Colombia had accepted an IMF loan offer for $3 billion to shore up its macroeconomic program to fight its worst recession in more than half a century, Reuters reports. It marks the first time Colombia has agreed a contingency loan from the IMF and will mean that the international credit organization begins monitoring the country's beleaguered economy for the first time ever. The Wall Street Journal (p.A10) also reports.
"This is a precautionary credit line on the order of $3 billion to consolidate and armor-plate our macroeconomic program," said Restrepo. "The idea is not that we would necessarily use the loan, but it will serve as a spare tire for the economy." The loan would take Colombia's available foreign credit package in 1999 to about $5 billion, following deals late last year with the World Bank and the IDB, notes the story.
Colombia?s economy, formerly one of the strongest in the region, is in the deepest recession in memory, adds the Financial Times (p.6). This week the government statistics department revised this year?s official first-quarter growth to a negative 5.86 percent, down from a negative 4.8 percent, the worst since records began.
The loan follows the recent visit of an IMF mission to Bogota, notes the story. While it supported the government?s fiscal adjustment program, the IMF team was concerned about the depth of the recession and, in particular, the growing fiscal deficit. The government had initially predicted a deficit of 2.1 percent of GDP this year, but the estimate has since grown to three percent.
The government is expected to present a comprehensive fiscal package on July 20, when Congress begins a new legislative session. The package, expected to encompass the main suggestions of the IMF mission, includes reform of the state pension system and reductions in state funding for the provinces. The government is also studying IMF recommendations to widen the income tax base and address record levels of unemployment.