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IMF Country Report No. 16/154
COLOMBIA
ARRANGEMENT UNDER THE FLEXIBLE CREDIT LINE AND CANCELLATION OF CURRENT ARRANGEMENT—PRESS RELEASE; AND STAFF REPORT
June 2016
In the context of the arrangement under the Flexible Credit Line and cancellation of Current Arrangement, the following documents have been released and are included in This package:
A Press Release including a statement by the Chair of the Executive Board.
The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on June 13, 2016. Based on information available at the time of these discussions, the staff report was completed on June 1, 2016.
A Staff Supplement of June 6, 2016 on the assessment of the impact of the proposed Flexible Credit Line arrangement on the Fund’s finances and liquidity position.
A Statement by the Executive Director for Colombia.
The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.
Copies of this report are available to the public from
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© 2016 International Monetary Fund
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COLOMBIA
ARRANGEMENT UNDER THE FLEXIBLE CREDIT LINE AND CANCELLATION OF THE CURRENT ARRANGEMENT
June 1, 2016
Executive Summary
Background: Colombia’s strong economic policy framework, comprising an inflation-targeting regime, a flexible exchange rate, effective financial sector supervision and regulation, and a fiscal policy guided by a structural balance rule, has underpinned a strong policy response and growth resilience to a large terms-of-trade shock.
Outlook: Growth is expected to decelerate to 2.5 percent in 2016 but gradually return toward potential over the medium term. Inflation increased due to temporary shocks but is projected to converge to the target band during 2017. The current account deficit will gradually shrink to 3½ percent, while net private capital inflows will remain stable. The authorities are firmly committed to maintaining their sound policy framework and strengthening policy buffers in the period covered by the proposed arrangement.
Risks: External risks have increased significantly since the current FCL arrangement was approved. Intensified global risks have increased the size of potential shocks and their transmission to Colombia may be more severe, despite strong fundamentals. Key risks include slower-than-expected global growth in risks to commodity prices, and turbulence in global financial markets.
FCL: The authorities are requesting a successor two-year FCL arrangement for 400 percent of quota (SDR 8.18 billion), which they intend to treat as precautionary, and thus will cancel the current arrangement (SDR 3.87 billion) which expires on June 16, 2017. They consider that a new FCL in the requested amount would provide stronger insurance against heightened external risks, help sustain market confidence, and support their economic strategy. The access requested would provide Colombia with adequate cover in an adverse external scenario. Staff assesses that Colombia meets the qualification criteria for access to Fund resources under the FCL arrangement, and recommends its approval by the Executive Board. The authorities stated that, conditional on a reduction of global risks, they intend to lower access to Fund resources in any subsequent FCL arrangements, with a view to gradually phasing out Colombia’s use of this arrangement.
Fund liquidity: The proposed commitment of SDR 8.18 billion would have a marginal impact on the Fund’s liquidity position.
Process: An informal meeting to consult with the Executive Board on a possible FCL arrangement for Colombia was held on May 25, 2016.
Approved By
Robert Rennhack and Mary Goodman
The report was prepared by a team comprised of Jorge Roldos (Head), Sergi Lanau, Francisco Roch, Daniel RodrĂguez-Delgado (all WHD), Manrique Saenz (SPR), and Mohamed Norat (MCM) with support from Cristina Barbosa, Andrea Herrera, and Adrian Robles (all WHD).
Contents
CONTEXT
RECENT DEVELOPMENTS
OUTLOOK AND POLICIES
ROLE OF THE FLEXIBLE CREDIT LINE ARRANGEMENT
A. Benefits of the FCL
B. Evolution of Risks
C. Access Considerations Under an Adverse Scenario
D. Exit Strategy
E. Assessment of Qualification
F. Impact on Fund Finances, Risks, and Safeguards
G. Staff Appraisal
BOX
1. External Economic Stress Index
FIGURES
1. FCL Qualification Criteria
2. Reserve Coverage in an International Perspective
3. Colombia and Selected Countries: Comparing Adverse Scenarios
4. Indicators of Doing Business and Institutional Quality
5. Public DSA—Composition of Public Debt and Alternative Scenarios
TABLES
1. Selected Economic and Financial Indicators, 2013–21
2a. Summary Balance of Payments (In million of US$), 2013–21
2b. Summary Balance of Payments (In percent of GDP), 2013–21
3. External Financing Requirements and Sources, 2014–17
4. Operations of the Combined Government, 2013–21
5. Operations of the Combined Public Sector, 2013–21
6. Monetary Indicators, 2013–21
7. Medium-Term Outlook, 2013–21
8. Financial Soundness Indicators, 2009–15
9. Indicators of External Vulnerability, 2013–21
10. Public Sector Debt Sustainability Analysis (DSA)—Baseline Scenario, 2005–21
11. External Debt Sustainability Framework, 2011–21
12. FCL Arrangement for Colombia—Impact of GRA Finances
13. Indicators of Fund Credit, 2015–21
APPENDIX
I. Letter from the Authorities Requesting FCL
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COLOMBIA
ASSESSMENT OF THE IMPACT OF THE PROPOSED FLEXIBLE CREDIT LINE ARRANGEMENT ON THE FUND’S FINANCES AND LIQUIDITY POSITION
June 6, 2016
Approved By
Andrew Tweedie and Mary Goodman
Prepared by the Finance and Strategy, Policy, and Review Departments
Contents
INTRODUCTION
BACKGROUND
THE PROPOSED FLEXIBLE CREDIT LINE ARRANGEMENT—RISKS AND IMPACT ON FUND FINANCES
ASSESSMENT
TABLES
1. Total External Debt, 2010–15
2. Capacity to Repay Indicators
3. FCL Arrangement for Colombia—Impact on GRA Finances
ANNEX
I. History of IMF Arrangements
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Press Release No. 16/279
FOR IMMEDIATE RELEASE
June 13, 2016
International Monetary Fund
Washington, D.C. 20431 USA
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