Petro government seeks borrowed money to finance the 2025 budget

There is less than a week left for the National Government to present the bill with the final accounts of the General Budget of the Nation for 2025, both in income and expenses, and from now on the expectation continues to focus on the movements that will be made to guarantee that growth is not affected. due to the cuts that liquidity problems in the State accounts are forcing.

In the midst of all this, a recent move by the Ministry of Finance puts on the table one of the strategies that would be being carried out by this entity to secure the money that is needed, with which the debt would be used to finance the appropriations of the PGN that is being built.

Conpes 4135

This is evident in document 4135 of the National Council for Economic and Social Policy (Conpes), after which the Ministry of Finance issued a formal request to the Higher Council for Fiscal Policy (Confis) – backed by National Planning – for the country to be able to borrow up to US$5 billion this year, by resorting to multilateral organizations.

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According to this document, the general objective is to issue a “favorable opinion to the Nation” to contract external loans for free use and rapid disbursement, including contingent credit lines in the event of natural, socio-natural or unintentional anthropogenic disasters, with international financial entities, multilateral organizations, development entities and governments.”

The argument also establishes that this guarantee for the acquisition of debt seeks to comply with the national government’s debt strategy in terms of optimizing financial costs and diversifying the portfolio of lenders.

“The financing needs projected for the fiscal year 2024 and presented in the sources and uses of the Central National Government establish the need to manage external debt disbursements of the order of US $ 5.7 billion, of which those that will come from credits with multilateral and bilateral organizations are part, as well as bonds issued in international markets,” they explained.

In this regard, they add that within the update of the 2024 Financial Plan, it is expected that around 56% will come from loans with multilateral and bilateral organizations, while the remaining 44% will be obtained from the international capital market, warning that “the freely-destined loans contracted to date against the quota approved by Conpes Document 4112, it is evident that the amount available is insufficient for the nation to maximize the freely-destined financing to which it may have access.”

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“Have credit instruments to financially manage risk liquidity in the event of natural or unintentional man-made disasters. Receive technical support and accompaniment from multilateral and bilateral organizations in the design and implementation of strategic public policy agendas that have an impact on the country’s development,” the document says.

A long process

To better understand this request, Portafolio spoke with Henry Amorocho, professor of Public Finance at the Universidad del Rosario, who indicated that this is only a first request, so the entire process is in its early stages and that now everything goes to a Fiscal Policy Council, which will study its viability.

“It would be up to him to give his opinion on this, of course after he makes the consideration in accordance with fiscal sustainability, with the constitutional criterion of fiscal sustainability and the process is in progress, the process is just beginning because also, among other things, very soon The General Budget of the Nation will be presented on July 29 in the Congress of the Republic,” he explained.

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In these accounts it must also be said that the country has already acquired debt for US$1.3 billion so far this year and that with the total quota of US$5 billion that is being requested, the US$5.7 billion stipulated as the ceiling in the Medium-Term Fiscal Framework would be exceeded, so the remainder would be valid for next year.

“This request is consistent with the projections established the current Medium-Term Fiscal Framework and Financial Plan, approved by the National Fiscal Policy Council, because it will allow the Government to obtain part of the external financing resources necessary for financing the fiscal deficit of the current and future fiscal years,” adds Conpes.

They also recall that of the US$3 billion approved in the March Conpes as debt space for the country, “seven external loans have been subscribed and disbursed for approximately US$1,634.5 million to finance the PGN for the 2023 and 2024 terms. In this way, there is an available balance of US$1,365.5 million, which is estimated to be used in the second half of 2024 to comply with the provisions of this year’s Financial Plan.”

Public debt

As of December 31, 2023, the total balance of the external public debt Colombia’s debt totaled US$79.614 billion, according to the Ministry of Finance and Public Credit. Of this total, 48.7% corresponded to bonds issued in the international financial market, totaling US$38.801 billion, while credits with multilateral sources represented 37.6% of the debt, reaching US$29.947 billion.

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Meanwhile, loans from bilateral sources accounted for 3.5% of the external public debt, equivalent to US$2.758 billion, while the remaining 10.2%, approximately US$8.109 billion, came from other sources of financing. The Ministry highlights that the Medium-Term Debt Management Strategy seeks to extend the average life of the debt portfolio, improving financial conditions and reducing interest rate and exchange rate risks.

Finally, it should be noted that the aggregate external debt of the Central National Government had an average life of 10.9 years and a duration of 6.4 years by the end of 2023. In addition, 81% of this debt was at a fixed rate, and 19% at a variable rate. The majority of the debt, 89%, was denominated in dollars, followed by 8% in euros and 2% in pesos. This reflects a diversified approach to foreign exchange risk management.