Colombia senate OKs government transfers project

BOGOTA, May 10 (Reuters) - Colombia's congressional upper house on Thursday voted to approve a reform law to the system of transferring funds to local governments, one of the key restructures Wall Street is watching as the country seeks to regain its investment grade rating.

The project must still pass two more legislative hurdles in the lower house to be approved before congressional sessions end in June. Thursday's approval by the Senate was the sixth for the transfer bill.

Local mayors and governors are lobbying Congress against the proposed constitutional amendment, which would limit central government cash payments to a top increase of 5 percent a year plus inflation.

Without approval of the bill, Colombia constitution says the government must transfer nearly half of tax revenue increases to local towns and provinces.

Colombia's economy is growing fast as President Alvaro Uribe leads a U.S.-financed campaign to crack down on rebels fighting an ongoing insurgency and drug traffickers. Foreign investment has grown rapidly as violence decreases.