Colombia’s government expects $3.5 billion (9.5 trillion pesos) in oil revenue this year, down 60% from 2013 as the sharp drop in crude prices reduces the oil industry’s tax and royalty payments, Finance Minister Mauricio Cardenas said on Wednesday.
The situation could worsen in the years ahead, cutting income from oil to $2.2 billion (6 trillion pesos), Cardenas told reporters in Bogota. He did not specify when oil revenue might fall to that figure, and said he did not have data for 2014.
While Colombia is not a major oil producer – it has less than seven years of reserves – oil is its largest export and typically accounts for about 20% of government revenue.
The government has already trimmed 6 trillion pesos from its budget this year in a bid to scale back nonessential spending and it pushed through a tax reform that extends previously expiring duties in an effort to keep revenues up.
“Even though oil is only 5% of (gross domestic product), the income from oil is very important to our fiscal accounts,” Cardenas told reporters.
Tax revenue was down 3% in the first two months of this year to $7.43 billion (19.9 trillion pesos) because of the oil price fall, the head of the tax authority said on Wednesday. The government has budgeted about $46 billion in tax revenue this year.
For each dollar that the oil price falls, the government loses about $120 million in revenue.
Latin America’s fourth-largest economy grew 4.6% in 2014, but the 50% plunge in oil prices since June has taken a toll, and economists expect growth to drop to as low as 3.3% this year and 2.6% in 2016.
($1=2,677.97 Colombian pesos) (Reporting by Carlos Vargas; Writing by Helen Murphy; Editing by Peter Galloway)