Colombia Public Finance Review
Over the past twenty years, fiscal policy has become one of the three pillars of macroeconomic stability for Colombia, the other two being the flexible exchange rate and inflation targeting. The credibility and sustainability of fiscal policy is th...
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| Language: | English |
| Published: |
Washington, DC
2022
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| Online Access: | http://documents.worldbank.org/curated/en/099735101312274831/P17533506f52680990a14b0aa1a02a12128 http://hdl.handle.net/10986/37168 |
| Summary: | Over the past twenty years, fiscal
policy has become one of the three pillars of macroeconomic
stability for Colombia, the other two being the flexible
exchange rate and inflation targeting. The credibility and
sustainability of fiscal policy is the result of strong
institutions (in particular, the fiscal rule and the
medium-term fiscal and expenditure framework) and a prudent
management of public finances. After the 1999 crisis,
Colombia managed to reduce the general government deficit
and built buffers, which allowed it to respond to the 2008
Global Financial Crisis. Colombia successfully withdrew the
2008–09 deficit expansion and ran one of the highest fiscal
balances in Latin America, until the COVID-19 crisis hit.
The COVID-19 crisis has created a large shock to the economy
and to public finances .Growth contracted to a minimum not
seen in over 35 years. The economic contraction and the
response needed to address the health emergency and to
sustain activity pushed the central government’s deficit and
the debt to their highest levels in decade, 7.8 and 64
percent of GDP respectively. Gains in poverty reduction
reached over the past 10 years were wiped off. |
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