Colombia has reduced its foreign borrowing plan by $1 billion in a bid to tame its currency, announced the Ministry of Finance Wednesday.
Finance Minister Mauricio Cardenas told reporters he plans to scale back the scheduled $2.6 billion foreign bond sales by 38%: a reduction of $1 billion. In January of this year Colombia already sold $1 billion in bonds, and it is now planned to sell $600 million over the remainder of 2013, according to Bloomberg.
BACKGROUND: Colombia issues a 10-year global bond at 2.7%
Serious revisions to Colombia’s 2013 budget and financial planning come after the peso’s 26% gain against the dollar since 2008. Easing Colombia’s currency has become a major priority of the government after a record value of capital inflows have distorted the country’s industrial and agricultural sectors, hurting exports and fuelling unemployment.
In January, coffee farmers demanded government support after their incomes were severely weakened beneath soaring production costs, part of which grew in response to the peso’s appreciation.
The adjustments made to the 2013 Financial Plan will reduce “borrowing needs in 2013 through lower borrowing from external sources,” according to the statement from the Finance Ministry and, “as a result of lower borrowing costs, the treasury can now reduce interest payments by $222 million.”
This, combined with swapping short-term for long-term debt, could save Colombia roughly $1 trillion in savings, reported the Financial Times.