Due to a weak peso and falling oil revenue, Colombia’s external debt has grown to more than one third of the country’s entire Gross Domestic Product.
According to data released by the central bank, Colombia’s external debt reached $107.8 million for the first half of 2015.
This number amounts to 33.4% of the country’s GDP, the highest recorded debt level since 2004.
An exchange rate that has climbed more than $1,000 COP against the dollar in the last year, and is now above COP3,000, combined with a significant economic slowdown, has weighed heavily on Colombia’s balance of payments.
The debt, which is measured in dollars, has grown exponentially in comparison to the Colombia’s GDP, which is measured in pesos.
A national debt is incurred when a country imports more than it exports. This trend which Colombia has followed since 2001 is made worse by the present weakened currency, as the country must spend more pesos to adjust to the international exchange rates.
Earlier this year, the Central Bank was forced to lower its expectations of GDP growth to 2.8% for 2015, down nearly 2 percentage points from 2014. The inflated national debt along with low commodity prices do not bode well for Colombia’s bank account in the current market conditions.
In the last year, Colombia made three bond issues abroad (October 2014 and January and March of this year), from which it earned 3.5 billion dollars. These resources, along with multilateral loans, have become part of the country’s external financing program.
91% of the external debt from January to June 2015 was concentrated in bank loans and bonds.
The increase in the debt was lead primarily by the public sector in the last year. As of June 2015, the debt of the public sector grew $8.2 million USD, 14 percent more than at the end of June 2014.
In the private sector, foreign borrowing grew $2.8 million, 7% higher than a year ago.