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Debt and Deficits:Colombia´s Unsustainable Fiscal Mix

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  • María Angélica Arbeláez Restrepo
  • Ulpiano Ayala Oramas
  • James Poterba

Abstract

This paper presents an overview of recent fiscal history in Colombia, and it projects the future course of fiscal deficits and the debt-to-GDP ratio under several different budgetary scenarios. Our projections, which are based on the macroeconomic and fiscal models developed at the Ministry of Finance and Public Credit, suggest that the current path of fiscal policy is not sustainable. Substantial increases in the government´s fiscal surplus are needed in order to return to a regime in which the debt-to-GDP ratio will stabilize in several decades. Our base case analysis suggests that stabilizing the debt-to-GDP ratio at 45 percent by the year 2030 would require a 1.8 percent of GDP reduction in the fiscal deficit, effective immediately. This assumes that the social security reforms introduced in the last Congress are enacted. If they are not, the required adjustment in the fiscal deficit is several percentage points greater.

Suggested Citation

  • María Angélica Arbeláez Restrepo & Ulpiano Ayala Oramas & James Poterba, 2002. "Debt and Deficits:Colombia´s Unsustainable Fiscal Mix," Informes de Investigación 2250, Fedesarrollo.
    • Handle: RePEc:col:000124:002250
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    File URL: http://hdl.handle.net/11445/1600
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    References listed on IDEAS

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    1. Alberto Carrasquilla B. & Natalia Salazar F., 1992. "Sobre la naturaleza del ajuste fiscal en Colombia," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 11(21), pages 165-190, June.
    2. Carlos Esteban Posada & Luis Eduardo Arango, 2000. "¿Podemos sostener la deuda pública?," Borradores de Investigación 3817, Universidad del Rosario.
    3. Patricia Correa, 2000. "Public Debt , Publit Debt Markets And Monetary Policy In Colombia," Borradores de Economia 3406, Banco de la Republica.
    4. Patricia Correa, 2000. "Public Debt, Public Debt Markets and Monetary Policy in Colombia," Borradores de Economia 147, Banco de la Republica de Colombia.
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    Cited by:

    1. Bernardi, Luigi & Fumagalli, Elena & Fumagalli, Laura, 2007. "Tax Systems and tax reforms in Latin America, Part I : country studies, Colombia," MPRA Paper 5224, University Library of Munich, Germany.
    2. Garcés Díaz Daniel, 2016. "Changes in Inflation Predictability in Major Latin American Countries," Working Papers 2016-20, Banco de México.

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    More about this item

    Keywords

    Deuda Pública; Política Fiscal;

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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