The Colombian government will present a new strategy on Wednesday to set targets for the use and management of mining royalties.
The fiscal regulation policy establishes guidelines for the government regarding the management of revenues generated from the mining boom.
The government wants to limit the risk of “Dutch disease,” when a country’s currency appreciates rapidly due to an inflow of wealth, harming exports. The plan is to prevent this by creating a stabilization fund to store the new oil wealth and prevent the peso gaining too much.
The new fiscal regulation policy will be presented to Colombian President Alvaro Uribe by the minister of finance, in a ceremony at the Luis Angel Arango library in Bogota. The strategy will then be discussed in Congress on July 20.
Another aim of the policy is to cut debt as a percentage of gross domestic product to 25.7% in 2021 from a projected 39.4% this year. This means Colombia needs an annual primary surplus of 1.3% of GDP until it reaches a surplus of 2.1% in 2017.
Although the plan will be presented by the current government, it may be taken up by Colombian President-elect Juan Manuel Santos when he assumes office on August 7. The incoming president and his Finance Minister Juan Carlos Echeverry have pledged to balance the budget by 2014 and create annual economic growth of 6% within two years.