President Gustavo Petro announced earlier in April that Colombia will re-negotiate the debt that the country has with the IMF. The aim is to convert the US $5.400 million short-term flexible credit line to a long-term credit line.
However, after Ricardo Bonilla, Colombia’s Minister of Finance, visited Washington, this alternative changed. The IMF declared that Colombia has to continue with its current long-term payment plan. The multilateral organism argues that Colombia must comply with its payment following the flexible credit line that was obtained by the country in 2020.
Why did Colombia’s government try to renegotiate the credit line with the IMF?
The Fund claims to have sent a clear message to Bonilla that stated: “The payments were already included in this year’s budget of Colombia with the IMF and there is no other plan.”
On the other hand, during a political control debate in Congress, the manager of Colombia’s National Bank, Leonardo Villar confirmed that the flexible credit line with the IMF will be renewed. The new credit line will cover US$7.500 million, which means that US$1.500 million has been reduced from the current credit line.
Until recently, Colombia and Mexico were the only two emerging economies in the region that had access to flexible credit with these characteristics. The IMF sees these credit lines as a privilege, given that they have favorable conditions in terms of interest rates and payment terms. Recently, Chile and Peru have been able to get on flexible credit lines.
The US$7.500 million will help strengthen the country’s international position. As of 2024, Colombia has international monetary reserves that account for US$60.000 million.
When President Petro asked to re-negotiate the debt with the IMF, the previous minister of finance stated that this credit line was a privilege for Colombia through his x account.
What did ex-minister Ocampo have to say about Colombia’s flexible credit line with the IMF?
Jose Antonio Ocampo explained that the IMF would not negotiate the payment terms without demanding anything in return. In this tweet, he added, “It would be a mistake to change the credit line for a long-term credit line with the fund, which would have significant conditionality, just like Argentina’s. It would be more expensive and would show that the country’s history of macroeconomic strength is getting lost.”
Lastly, Ocampo said that Colombia’s government must pay, and therefore, the installments must be covered and the flexible credit must be renewed.
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