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Fiscal concerns remain.
Mounting
political tensions between the national Congress and the Pastrana
administration in April and the postponements in privatisations, threaten
to delay progress on economic reforms and should raise concerns about the
government's ability to meet the 3.5% of GDP fiscal deficit target agreed
to with the International Monetary Fund under the auspices of the Extended
Fund Facility. In June,
Congress approved an additional US$ 1.5 billion budget item needed to
finance social outlays, debt servicing costs and general governmental
expenditures. The government
claims that the US$ 642 million in budget cuts adopted in May combined
with improved tax inflows accompanying the economic recovery will enable
compliance with IMF targets. The
possibility for the adoption of a Fiscal Responsibility Law similar to
Argentina and Brazil is anticipated to further firm the commitment to
fiscal stringency.
Inflation steady.
Central Bank efforts to keep monetary policy tight and
the modest rate of economic recovery appear to be keeping prices
contained. Consumer prices,
actually dropped 0.02% in June, following a 0.5% increase in May.
The June drop brought annual inflation to 9.6%, which is below the
Central Bank's 10.0% target for this year.
Note:
The above text is an abridged version of the LatinFocus Consensus Forecast
briefing on Colombia. For more details please click here.
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