The International Monetary Fund (IMF) urged Colombia on Monday to diversify its economy and seek increased foreign investment in the fossil fuel sector as oil reserves could deplete in seven years.
The international economic organization did so in a preliminary report that followed a visit to the South American country.
According to the IMF, the economic outlook for Colombia for the short-term looked positive, “but the medium-term agenda should revolve around structural reforms to boost inclusive growth and productivity.”
“Productivity growth in the non-oil sector has been lackluster even in the boom years. If Colombia is to grow above 3% in the medium term and create high-quality jobs, productivity needs to increase substantially,” the economic institution said.
The IMF advised to prioritize ongoing investments in the country’s road infrastructure and the country’s ports to increase competition with other nations.
The organization also urged to make further investments in education and reduce the country’s high unemployment and informality rates.
Informality has fallen substantially in recent years, thanks to improvements in education and the payroll tax reform of 2012, but close to 50% of workers in the main cities and over 60% of workers nationally remain informal. Colombia improved the coverage of higher education from 37% in 2010 to 52% in 2017. Going forward, programs to further improve both access to and the quality of higher education remain key to reducing skill mismatches and increase formality.
International Monetary Fund
To prevent the premature depletion of the country’s oil reserves, investments in the oil sectors remain “critical for medium-term growth,” according to the IMF.
Measures included in the 2016 tax reform, as well as the regional development efforts associated with the peace process, have supported investment in the sector. Investment in production is expected to increase this year, especially in Ecopetrol. However, investment in exploration remains low, and continued efforts to preserve incentives for such activities and the overall competitiveness of the sector would help ensure its rebound.
International Monetary Fund
Colombia’s oil and mining industry accounts for more than half of the country’s exports, and an important revenue generator for the government.
Unless new well are found, the country has enough reserves to produce oil for another seven years, after which other sectors would have to sustain fiscal and economic stability.
