What to make of Colombia’s turn to the IMF

While Colombia isn’t facing the balance of payments strains that an IMF program is designed to tackle, an agreement with the Fund – as the government seems to be aiming for – could make austerity plans more credible and reduce debt servicing costs. Given the scale of the fiscal challenge and the fragmentation of congress, there’d be a high risk that any program goes off track though. Our base case remains that the government won’t be able to prevent the public debt-to-GDP ratio from rising through de la Espriella’s term.