Colombia in Talks With IMF on Financing as Fiscal Crisis Deepens

Colombia has held a series of technical discussions with the International Monetary Fund over the past several weeks, focusing in particular on securing financing, according to three people with knowledge of the matter. The talks are aimed at reaching a potential agreement that could help restore order to the country's public finances.

The discussions have centered on obtaining alternative financing at more favorable rates, the sources said, speaking on condition of anonymity because the conversations are private. Colombia has raised its domestic and external borrowing targets amid a wide fiscal deficit projected for both this year and next.

President Abelardo De La Espriella said in a televised address on Sunday night that he had directed his economic team to pursue talks with the IMF. "I have given clear instructions to the finance minister and the entire economic team to take charge of talks with the International Monetary Fund," he said, adding that the aim was a negotiated solution to the crisis. He described the country's fiscal situation as the most critical in its history.

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

The finance ministry did not immediately respond to a request for comment, and the IMF said it had no immediate comment on the president's remarks.

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

Colombia's fiscal difficulties stem from 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 lifted its fiscal deficit target for this year to 7.2% of gross domestic product from a previous 5.3%, and raised next year's target to a record 9.4% of GDP. Borrowing is set to increase by more than $10.5 billion this year, while in 2027 it is projected to reach $71.66 billion, more than double the original plan.