Colombia's Petro suggests increasing debt to spend $13.5 bln on land for farmers

"Buying the land as the president is proposing will involve a much higher indebtedness, not only than that set out in the medium-term fiscal framework, but also than at the level markets view Colombian public debt to be sustainable," said Sergio Olarte, chief economist at Scotiabank for Colombia. "It's important to both evaluate sustainability and effectively comply with the government's plan," Olarte added.


Reuters | Updated: 24-09-2022 01:47 IST | Created: 24-09-2022 01:45 IST
Colombia's Petro suggests increasing debt to spend $13.5 bln on land for farmers
File photo. Image Credit: Wikipedia
  • Country:
  • Colombia

Colombia's President Gustavo Petro on Friday proposed changing the country's medium-term fiscal framework to take on internal debt of some 60 trillion pesos ($13.54 billion) to buy land and sell it to farmers at below-market prices.

Petro, Colombia's first leftist president, announced the plan amid a spate of land invasions by indigenous people and farmers who have misinterpreted his campaign promises regarding agricultural reform and taken it upon themselves to occupy land. "Three million hectares," Petro said during an interview with local outlet Caracol television. "We'll have to buy them at commercial prices so as to avoid fighting with the big land owners, or they'll call it expropriation."

Latin America's fourth-largest economy has experienced a drastic rise in debt in recent years due to the coronavirus pandemic, leading it to lose its investment-grade rating from risk agencies. Colombia's current medium-term fiscal framework expects to close this year with public debt equivalent to 56.5% of gross domestic product (GDP) and fiscal deficit of 5.6% of GDP, before falling to 3.6 % by 2023.

The country's Autonomous Fiscal Rule Committee (CARF) this week warned that Colombia's public finances are stretched to the limit and urged the government reduce public spending and tackle debt. "Buying the land as the president is proposing will involve a much higher indebtedness, not only than that set out in the medium-term fiscal framework, but also than at the level markets view Colombian public debt to be sustainable," said Sergio Olarte, chief economist at Scotiabank for Colombia.

"It's important to both evaluate sustainability and effectively comply with the government's plan," Olarte added. "At the end of the day, 60 trillion pesos is about 5 percentage points of GDP, which is quite a lot of money in four years." ($1 = 4,432.6300 Colombian pesos)

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

Give Feedback