UPDATE 1-Colombia central gov't has fiscal balance-minister

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BOGOTA, July 15 (Reuters) - The Colombian government effectively had fiscal balance in the first three months of the year, compared with a deficit worth 0.7 percent of GDP in the same period a year ago, the finance ministry reported on Tuesday.

The deficit was seen as a key obstacle to Colombia's effort to regain the investment grade credit rating it lost during the country's 1999 economic crisis.

But with the economy slowing to an expected 5 percent this year and military spending up, analysts say the Andean country's fiscal woes are not over.

The government reported a statistically tiny central government fiscal deficit of $78 million in the first three months of the year, compared with about $1.5 billion in the same months of 2007.

"This is a positive development in terms of Colombia's credit-worthiness, based on high oil export revenue, an increase in government tax revenues and low interest paid on government bonds," said Bertrand Delgado, an economist who covers Colombia for IDEAglobal in New York.

Colombia's economy grew more than 7.5 percent in 2007 thanks in part to better security under President Alvaro Uribe, who has cracked down on drug-smuggling Marxist rebels and attracted record investment as security has increased.

"Looking forward, government spending is expected to increase to fund military programs. So Colombia continues to be fiscally vulnerable as the economy slows down," Delgado said. "If oil prices fall it will increase that vulnerability." (Reporting by Javier Mozzo and Hugh Bronstein; Editing by Andre Grenon)