Posted by Adriaan Alsema on Jun 26, 2008 Leave a comment

Colombia cuts spending to fight inflation

“The government is making an additional effort to cut public spending,” Uribe said in a speech to local business leaders. The government wants to control consumer prices by reducing the national budget, Finance Minister Oscar Zuluaga said following a meeting late on Tuesday in which officials rejected the idea of trying to freeze food prices. “The cure would be worse than the disease,” Zuluaga told reporters, rejecting the idea of price fixing floated several days earlier by Uribe. The country’s business community has long asked the government to cut spending to tame high consumer prices and stop the jobs-threatening rise of the peso. The local currency is up about 8 percent against the dollar over the last year, prompting farms and factories to lay off workers as they lose international competitiveness. Inflation, meanwhile, rose a faster-than-expected 0.93 percent in May, putting Colombia’s 2008 consumer price rise target ceiling of 4.5 percent all but out of reach. The president nonetheless has urged the central bank to cut interest rates to keep the economy growing. Policymakers rejected that idea on Friday when they decided to keep the bank’s key rate unchanged at 9.75 percent. Uribe has attracted record foreign investment by making Colombia’s cities and highways safer with his U.S.-backed crackdown on leftist rebels. He is leaving open the possibility of seeking a third term in office in 2010. (Reuters)