Colombia’s Comptroller General said Wednesday that some positive effects of the recent depreciation of the country’s peso aren’t sufficient to offset plummeting oil prices and other negative effects triggered by the currency’s current state.
The Colombian government must, “be cautious in managing its finances and adjust its financial plan to the new realities,” the Comptroller warned in a report.
The report estimated that Colombia’s oil revenue would be reduced by approximately $842 million in 2015 and a staggering $4.6 billion pesos in 2016.
The peso’s depreciation may offset some of the oil industry’s problems, but could also trigger negative effects on other important public finance indicators however.
Furthermore, the large amount that the peso would need to depreciate by in order to offset falling oil revenues would likely lead to much higher inflation as a result of comparatively higher import prices, said the press release.
The comptroller warned that other problems triggered by a depreciated peso may include, among other things, the balance and payment of foreign debt and national operating costs among others.
According to the national watchdog’s report, both the service payments on external debt and the stock of external debt denominated in dollars may increase. This was illustrated by comparing the difference between public debt stocks in Colombian pesos in August and December 2014, the period in which the US dollar commenced its charge.
Public debt stock totaled $56,783 million at the end of August 2014, it was reported by the Comptroller.
Applying the average exchange rate for August ($ 1,899.07) to the US dollar denominated debt, this would amount to 107.8 trillion pesos.
Using the Representative Market Rate for December 2014 ($2392.46), the public debt stock ballooned to 135.8 trillion pesos, a 26% increase.
The report did take a more positive long term stance on the depreciating peso however, stating that it, “may well be interpreted as a phenomenon of correction after 10 years of appreciation.”
“As noted, the current levels have not reached the values of exchange rates between 2002 and 2006, this could indicate that despite the high volatility what is actually happening is a temporary phenomenon which is trying to reverse the strong appreciation that occurred between 2003 and 2014,” the comptroller noted in the report.
Sources
- Devaluación no alcanzaría a ser suficiente para compensar caída de los precios del petróleo, advierte la Contraloría (la Contraloría General)
- Devaluación no alcanzaría para compensar caída del petróleo (Mercado de Dinero)
- Ser cauto en el manejo de sus finanzas recomienda la Contraloría al Gobierno (El Espectador)