Colombia to strengthen fiscal management, promote faster growth with IDB support

US$600 million financing from IDB will help Colombia continue to develop its fiscal reform program, fostering growth and macroeconomic stability

Colombia has continued to deepen its fiscal reform program aimed at raising tax collection, promoting a more efficient use of public spending, and improving debt as well as the management of public assets and liabilities with a US$600 million loan from the Inter-American Development Bank (IDB).

This operation is the second in a series of two operations under the Programmatic Policy-Based Loan (PBL) modality. The series began in 2014 and was agreed upon with the Government of Colombia to support structural measures to promote fiscal sustainability and stability within the framework to join the Organization for Economic Cooperation and Development (OECD) and to strengthen the country’s peace process. The PBL seeks to meet the main challenges that Colombia faces on the way to fiscal consolidation and growth acceleration.

This second operation will finance the strengthening of tax and customs revenue management and collection –including the implementation of a pilot plan for the widespread use of electronic invoicing –, as well as a switch to a real-time operating model with tax agency prevalidation, and approval and implementation of the new Customs Statute. It will also support moves to boost public spending efficiency, particularly in the area of management of investment projects financed by the National Royalties System, with a special focus on localities affected by the conflict.

In addition, the operation will finance steps to improve public debt and contingent liabilities management, including approving a new debt management strategy oriented to lengthening the average maturity of debt, strengthening the public-private partnerships preparation process to mitigate fiscal risk, and implementing policies to reinforce national-state-owned companies’ management and performance.

The IDB financing is for a 20-year term, with a 5.5-year grace period and a LIBOR-based interest rate.