Colombia: public finance concerns here to stay

The recently-published fiscal plans of Colombia’s government seem to have alleviated some near-term fiscal concerns, but we think the medium-term budget and debt projections are based on rosy assumptions around growth and oil prices. Policymakers’ (and the consensus) view that the public debt ratio will stabilise over the medium term looks too sanguine; we think it’s more likely to rise. This points to rising risk premia on Colombian financial assets and is one of the main reasons why we expect the peso to fall further in the coming years.