“The flexible credit line has not been lost”: Ministry of Finance

Amid all the noise generated in the country by the International Monetary Fund's recent announcements regarding the Flexible Credit Line (FCL) and the warnings issued by this organization regarding the fiscal situation, Finance Minister Germán Ávila responded to this development and offered a measure of reassurance to the market, emphasizing that the situation is not as serious as it has been perceived to be.

The first thing this official clarified was that the country has not lost its access to this financial instrument and that currently, only the final decision on its continuation has been postponed while the economy recovers and reaches the levels of stability recommended by the IMF.

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According to Ávila, some market voices have incorrectly claimed that the IMF closed Colombia's access to the FCL, a tool that has been in effect for the country since April 2009 and was renewed in 2024 for a two-year period. He stated that "that is not true" and explained that the current process corresponds to the midterm evaluation agreed upon at the time of renewal, as well as the international organization's annual Article IV consultation.

"The Flexible Credit Line is a facility that the IMF offers to very few countries due to their sound macroeconomic and fiscal management. In our case, it was renewed for two years on the condition that an evaluation be conducted in the first year, and that is precisely what is currently underway," said Ávila, who emphasized that the country remains eligible for the program while the process is completed.

Furthermore, the minister emphasized that during recent meetings held in both Bogotá and Washington, the Fund's technical team recognized Colombia's resilience in managing its monetary, external, and fiscal fronts. However, they did not focus on the concerns raised about the fiscal future.

" The focus has been on controlling inflation and aligning it with the policy target, reducing the current account deficit, and making efforts to recover revenue and streamline spending without sacrificing compliance with the National Development Plan, as well as proper management of public credit," he stated.

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Regarding recent macroeconomic achievements, Ávila explained that inflation has been progressively declining and is expected to close the year at around 4.2%, approaching the policy target of 3%. He also highlighted the reduction in the current account deficit and the positive dynamics in external financing, evidenced by the successful placement of USD$3.8 billion in international bonds, a transaction that generated demand almost three times the amount awarded.

However, he acknowledged that significant fiscal challenges persist. According to the Minister of Finance, the government is aware of the concerns raised by the IMF regarding fiscal deterioration, but he assured that measures are already being implemented to reverse this trend.

"The improved revenue collection results in March and April, along with the spending adjustments that began in December 2024, give us cause for optimism. These efforts will be consolidated in the medium-term fiscal framework we will present in June," he stated.

Ávila also took advantage of his remarks to emphasize the strategic value for Colombia of maintaining access to the Flexible Credit Line, as it acts as a reputational boost in international markets.

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Despite this, he emphasized that the country has made responsible use of this instrument: "Since its approval in 2009, Colombia has only used the available quota during the pandemic, requesting $5.4 billion, of which we have already paid the majority, leaving only $1.8 billion outstanding," he explained.

Finally, the head of the economic portfolio dismissed the concerns of some market sectors who interpreted the postponement of the evaluation as a deterioration in the international perception of Colombia. "Our trading partners and international lending institutions do not agree that the postponement necessarily results in a deterioration in the country's economic strength. Our will and decisive action to overcome the fiscal difficulties are clear," he concluded.