No end to Colombia’s fiscal saga in sight

The IMF’s decision to pause Colombia’s access to its flexible credit line is not particularly concerning given the country’s robust external position, but the Fund has shone the spotlight back onto the country’s fiscal problems. With general elections approaching next year, there’s unlikely to be any appetite for austerity. A rising public debt-to-GDP ratio is likely to raise the country risk premium further, put downward pressure on Colombians asset prices and poses an upside risk to our interest rate forecast.