Colombia’s 2015 government budget was made assuming oil prices would not fall below $98 per barrel. However, with the oil price sitting at around $66 per barrel, the government is left with a huge monetary gap to fill.
Considering that the Colombian Ministry of Finance assessed their yearly budget, based on an oil price of $98 per gallon, the current oil price of $68 ($30 less) would leave the Colombian government with $6 billion less to play with than they had planned.
Despite the shocking figures, Minister of Finance Mauricio Cardenas has called for calm, stating that the fall in crude oil prices should not affect the Colombian economy too dramatically in 2015.
Cardenas claimed that Colombia’s economy would not be greatly affected in 2015, but would in 2016 if the international crude oil price slump continues.
With oil accounting for more than 67% of total Colombian exports in 2013, falling market prices and production could threaten the Colombian economy.
In an interview with Blu radio, Cardenas stated that “the budget for 2015 was already approved and that budget is financed in great part by the results of mining and energy sector in 2014. These are the results that will determine the profits of companies and these will determine taxes and dividends in the case of [state-run oil company] Ecopetrol. ”
Cardenas added that due to the work of his government economic advisory committee that long term projections on products such as crude oil were made, so that situations such as the current drop in oil prices did not hit Colombia too hard.
The seemingly relaxed Minister of Finance seems to be taking the oil price crash relatively well, considering he told Caracol radio three months ago that “is essential for Colombia that oil prices will not fall much below $ 100 per barrel.”
The Minister’s original concerns seem to be mirrored by the Colombia Comptroller General’s Office which raised concerns on Monday about the potentially damaging effects of the oil price slump on the Colombian economy in 2015 and beyond.
In response to the continuing landslide in oil prices in November 2014, the Comptroller general stated the drop “will certainly have repercussions on the growth of the GDP (gross domestic product) and could generate signs of recession in the medium term”.
November 2014 has seen the biggest drop in oil prices worldwide in three decades, and has led for calls on governing body OPEC to reduce its production target of 3 million barrels daily, in response to the crash in prices.
At a meeting last week, OPEC refused to reduce its production targets despite pleas from Venezuela and Iran who are also seeing their national budgets shrink along with the oil prices.
MORE: Colombia oil companies hit by OPEC decision to maintain production