By Nelson Bocanegra
BOGOTA (Reuters) – Colombia may take out more multilateral loans than previously expected as part of efforts to increase liquidity amid economic fall-out from coronavirus, the country’s director of public credit said on Wednesday.
The government and central bank of Latin America’s fourth-largest economy have used an arsenal of measures to boost liquidity and help businesses and low-income citizens hit by the effects of the virus, including a more than month-long nationwide quarantine.
Business leaders have said the measures are not enough.
Part of the country’s “lines of defense” will be accelerating the receipt of $1.7 billion in loans it has already agreed with multilaterals and possibly asking for an as-yet undetermined amount of additional support, director Cesar Arias told Reuters.
“In the fiscal plan we had a more disperse plan throughout the year, but today to confront this increase in liquidity needs we will possibly be accelerating the outlays,” Arias said.
“We are also evaluating new ways to increase those amounts,” he said, adding that with the potential increase in loans the country will be in a “good position” to deal with increased need.
“It depends on the analysis of the situation,” he added.
The government has already increased its budget by 18 trillion pesos, some $4.6 billion, in order make extra welfare payments to the elderly, young people in education and the poor, among other measures.
It also will guarantee credit for businesses of up to 80 trillion pesos.
Arias would not say how much the country’s deficit may increase in the current circumstances, but said it made sense to expect a revision to government predictions of 2.2% of gross domestic product.
The country’s so-called “fiscal rule” includes clauses that can be activated in case of major upsets like a fall in oil prices, Colombia’s biggest export and source of foreign exchange.
“Up to now those clauses have not been activated,” Arias said. “(The fiscal rule committee) will take their decision and we will have a new trajectory of fiscal deficit based on the behavior of these variables.”
Analysts have predicted the deficit may widen to between 4% and 4.2% of GDP this year. Meanwhile, rating agency Fitch last week lowered Colombia’s credit rating, while S&P reduced its outlook.
Finance Minister Alberto Carrasquilla said on Wednesday the month-long quarantine may cost the country 6% of its GDP.
“Without a doubt this second quarter will be the worst in our history,” he told a congressional committee.
(Reporting by Nelson Bocanegra; Writing by Julia Symmes Cobb; editing by Diane Craft)
