Colombia to Delay 3 Trillion Pesos in 2009 Budget
Colombia will “delay” 3 trillion pesos ($1.4 billion) in spending from the 2009 budget in a bid to bolster investor confidence amid a global economic crisis.
The spending delay, representing 2.2 percent of the 140.5 trillion-peso budget, may be temporary, the president’s office cited Finance Minister Oscar Ivan Zuluaga as saying in an e- mailed statement. The measure won’t affect spending on social programs, security or infrastructure.
Latin America’s fourth-biggest economy has slowed more than expected this year as 16 central bank interest rate increases in 2 1/2 years made loans to businesses and consumers more costly. The global credit crunch has also led Colombians to scale back purchases of big ticket items like washing machines and cars.
“It’s a drop in the ocean but a good sign to the market the government is being prudent,” said Rupert Stebbings, head of international sales at Interbolsa SA in Medellin. “The most important thing is that infrastructure is untouched because above all else this country needs roads, ports and other such projects.”
The government’s plan will effectively reduce the budget to 137.5 trillion pesos with the delay of 1.5 trillion pesos in investment spending and another 1.5 trillion pesos in unspecified spending, the statement said.
“The measure seeks to preserve confidence in the economy and strengthen investor confidence,” the statement said.
Zuluaga said the government will reevaluate the delay in light of how much it collects in taxes next year and the strength of the economy in the coming months.
President Alvaro Uribe, serving a second four-year term, is seeking to contain the government’s budget deficit while increasing social spending and access to health care for the poorest Colombians.
He has criticized the central bank for curbing growth by maintaining high interest rates for too long in a bid to stem inflation, which peaked in October at 7.9 percent.
Zuluaga said the government decided on the plan after seeing a “lower dynamic” in the economy following the release yesterday of third-quarter economic data.
The country’s gross domestic product expanded 3.1 percent in the July-through-September period from a year earlier as retail sales and industrial output fell. Colombia’s GDP expanded 6.2 percent in the third quarter of 2007 from the year earlier period.
The government yesterday lowered its forecast for economic growth this year to 3.5 percent from 4 percent and cut next year’s forecast to 3 percent from 3.5 percent.
By Helen Murphy – Bloomberg
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