UPDATE 1-Colombia says leaves Isagen sale to next government

* Colombia says no time to sell Isagen shares

* Isagen sale seen part of deficit management (Adds market reaction)

BOGOTA May 14 (Reuters) - Colombia said on Friday it had run out of time to sell the state's share in electricity generator Isagen, leaving the decision to next government as part of its management of fiscal deficits.

The government of President Alvaro Uribe, who steps down in August, had planned to sell a controlling 57 percent stake -- worth more than $1.5 billion -- in the firm this year as an essential step to covering the deficit.

"The finance ministry considers it prudent to leave the decision on the sale of the state's share in Isagen to the next administration," the ministry said in a statement. "The estimated time to properly carry out the operation goes beyond this government's period."

Should the sale fall through, the next government will have to seek other financing options to cover the wide deficit, one of the principle barriers to Colombia regaining investment grade for its sovereign debt.

After the announcement, the peso fell 0.58 percent 1,991 pesos versus the dollar in next-day trading through brokers on uncertainty on the country's fiscal outlook, traders said.

The remaining shares of Isagen ISG.CN are traded on the Colombian Stock Exchange.

Colombia's consolidated fiscal debt for this year is forecast at 3.7 percent of gross domestic product and the national government deficit is seen at 4.5 percent of GDP, according to the government's financing plan.

The two leading candidates running for the May 30 election, former Defense Minister Juan Manual Santos and two-time Bogota Mayor Antanas Mockus, are both promising to seek to increase tax revenue to help narrow the country's deficits. (Reporting by Patrick Markey; Editing by Dan Grebler)