President Gustavo Petro raised the possibility of suspend debt payments If Congress refuses to increase andThe debt quota at 17.6 billion dollars.
It is unlikely that Colombia will enter ‘default’, but the fact that the president is willing to clearly suggest it country risk increases.
Petro says it wants the new debt quota to be able to pay the current debt with returns “hopefully lower“.
(See: What effects would cutting interest rates ‘very quickly’ have, according to Banrep).
Since 1999, Congress has raised the limit by about $70 billion. But pandemic-era debt was exempt from the ceiling, including a line of credit of 5.3 billion dollars with the IMF.
Gustavo Petro.
Presidency of Colombia
That means that as debt is paid off this year and next, there will be no more room for borrowing within the ceiling, the Finance Ministry said in March.
(See: The risks that could condition Colombia’s rating, according to Fitch Ratings).
The spread of Colombia’s 2034 dollar bonds has increased 10 basis points, and the yield on 10-year peso bonds 25 basis points, until reaching its highest level in a month. They are not big movements.
(See: Why for Minhacienda has the ‘ghost’ of the recession moved away from the economy?).
The broader picture is that the market does not like Petro’s announcement and Colombia’s risk premiums have increased compared to their peers since the 2022 elections, that won.
(See: What does the investment agreement between Colombia and Venezuela that was approved consist of?).
BLOOMBERG
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