Colombia seeks IMF assistance amid rising fiscal deficit

Colombia's government is engaging with the International Monetary Fund to secure financial assistance amid ongoing fiscal challenges. President Abelardo De La Espriella has directed his economic team to pursue potential agreements beneficial to the nation's finances. The country is exhibiting increased borrowing in response to a widening fiscal deficit this year and next. The IMF is currently conducting institutional visits to assess the situation and explore financing options.

The Colombian government has held a series of technical advance discussions with officials from the International Monetary Fund (IMF) over the past several weeks, particularly about securing financing, in an effort to reach a potential agreement that could help restore order to the South American country's finances, three sources with knowledge of the matter told Reuters on Monday.

Colombian President Abelardo De La Espriella said late on Sunday that he had instructed his economic team to hold talks with the IMF to seek a way out of the fiscal crisis.

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The sources, who requested anonymity because the discussions are private, said the talks have focused on securing alternative financing at more favorable rates, as the country has increased its domestic and external borrowing targets amid a wide fiscal deficit expected this year and next.

Another source familiar with the discussions told Reuters that IMF staff are currently in Colombia on a scheduled institutional visit led by Deputy Managing Director Nigel Clarke. That source said it was too early to discuss any details about the size of a possible IMF financing program and that moving toward a program would require a dedicated staff visit and discussions with Colombian authorities.

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The finance ministry did not immediately respond to a Reuters request for comment.

Colombian Vice President Jose Manuel Restrepo and the country's economic team discussed their contacts with the IMF and their intention to seek an agreement during some meetings with business leaders and capital markets investors in New York, two of the sources said.

"I have given clear instructions to the finance minister and the entire economic team to take charge of talks with the International Monetary Fund. I have given that instruction in order to seek a negotiated solution to the crisis," De La Espriella said in a televised address on Sunday night. "We all know that the country's fiscal situation is the most critical in our history."

The IMF said it had no immediate comment on De La Espriella's Sunday remarks.

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Colombia is fiscally struggling amid lower tax revenue, expanded spending under the previous leftist government and persistent inflation. De La Espriella has promised sweeping austerity measures to cut spending.

The government has raised its fiscal deficit target for this year to 7.2% of gross domestic product (GDP) from a previous 5.3%, and has increased the target to a record 9.4% of GDP for next year. It will increase borrowing by more than $10.5 billion this year. In 2027, borrowing is set reach to $71.66 billion, more than double what was initially planned.