A large number of the country’s departments are facing troubling financial situations, Colombia’s comptroller general revealed Wednesday.
“The debt of the departmental governments of this country is quite large,” insisted Pedro Luis Bohorquez, warning that a number of Colombia’s 32 departments are suffering unsustainable levels of debt.
Bohorquez emphasized that the negative economic outlook did not apply to the entire nation. Although not operating at optimal levels, some departments, such as Antioquia and Cundinamarca, continue to maintain healthy levels of debt and implement sustainable economic policies.
The southwestern department of Valle de Cauca was labeled as one of the severest cases, while Choco presented a question mark due to questionable accounting practices that the government is currently attempting to clarify.
Colombia has been experiencing financial difficulties at the departmental level ever since the passage of the Constitution of 1991, which precipitated a process of fiscal decentralization whereby the departments were tasked with spending national government tax revenues given to them through a system of transfers. Although the original intent was to ensure more efficient use of government funds, the system ultimately allowed departmental governments to spend without internalizing the costs. Within a few years of the passage of the ’91 constitution, Colombia’s national debt balloned, forcing the country to accept an IMF loan in 1999, the country’s first.
While the country’s current national debt is approximately $77 billion, or 20.6% of its GDP, its economy has grown a steady rate around 4.5% in recent years. Economists fear that such growth could be harmed by the looming global financial crisis driven heavily by negative news from Europe.
Bohorquez insured that the departments could weather the current storm if they follow their respective suggested financial accomodations. However, not all members of government are as confident in the current ability of the departments to solve their debt issues.
An official of the Finance Ministry, Angel Maria Gomez, announced the department of Tolima was saddled with a debt of almost half a billion Colombian pesos. Gomez expressed doubts that the department would have the funds necessary to compensate its debtors.
“The truth is that we are not going to have the means necessary to pay this mountain of obligations,” warned the official.
Such a negative outlook comes on the same day that a group from the World Bank arrived to Bogota in order to analyze the country’s fiscal outlook. It will be in the country’s capital from July 11 to July 19 in order to analyze a number of issues such as the tax system and a restructuring of the debt.