Colombia expects its 2011 fiscal deficit to come in at 4% of gross domestic product as higher tax revenue helps offset added spending to deal with massive floods that have destroyed roads and farmland.
Finance Minister Juan Carlos Echeverry said that the central government deficit, which excludes state-owned firms and local governments, for 2010 was 3.9% of GDP, below the official target. In 2011, the government is boosting its tax intake after it closed a loophole used to sidestep a financial transactions tax.
“Our tax intake in January increased 20%,” Echeverry told reporters Wednesday. The goal for this year is 4% of GDP, he added. The administration of President Juan Manuel Santos is pushing to rein in the country’s fiscal deficit, one of the main hurdles for Colombia to obtain the coveted investment-grade status that was lost a decade earlier. “These numbers prove our fiscal discipline,” Echeverry added.
The administration is trying to deal with the devastating impact of heavy downpours that lashed the country in the last months of 2010 without hiking its deficit. Part of the government’s plan calls for the partial privatization of Ecopetrol SA (EC, ECOPETROL.BO), the state-run oil firm.
Santos signed a decree in December allowing the government to sell as much as 10% of Ecopetrol without the approval of Congress as part of an emergency legislative package geared at dealing with the impact of the rains. However, Echeverry said Wednesday that the sale of a stake in Ecopetrol would still need to be approved by Congress. “The government believes that the sale of Ecopetrol should go through the political control of Congress,” he said.
The proceeds from the privatization have been earmarked to pay for reconstruction efforts and large infrastructure projects. Echeverry said on Jan. 12 that instead of selling the 10%, the government could sell as little as 5%, which would be done over several years. The government could sell as little as 1% this year, Echeverry said. The Colombian state owns just under 90% of Ecopetrol.