BOGOTA, July 28 (Reuters) - The Colombian government offered a first look at its proposal for a $78.4 billion 2018 budget on Friday, in a bid to retain its ‘BBB’ credit rating, ahead of months of debate and negotiations on the bill in Congress.
The 235.6 trillion pesos peso plan includes cuts to social programs, said Finance Minister Mauricio Cardenas, during a presentation of the proposal. Congress must vote on the budget in October at the latest.
Under the budget, debt servicing will cost the country 51.9 trillion pesos, pensions 41.1 trillion and operations 149.3 trillion, Cardenas said. Funding for social programs would total 34.3 trillion, down 5 percent from this year.
“The most important goal is that this budget guarantees our BBB rating, that’s what ratings agencies most focus on,” Cardenas said. “Austerity in terms of spending is paid back with growth, because it guarantees a good rating.”
The plan is a 1 percent increase over this year’s budget. Analysts and credit agencies consider the government’s fiscal objectives to be overly optimistic and unlikely to be met, risking the credit rating.
The government is aiming for a fiscal deficit of 3.6 percent this year and 3.1 percent in 2018.
The Andean country, a top exporter of coffee, coal and oil which was battered by the global fall in crude prices, has long been grappling with the twin pressures of falling growth and above-target inflation.
This week the government cut its growth forecasts for this year and next to 2 percent, down from a previous forecast of 2.3 percent, and 3 percent, lower than an earlier projection of 3.5 percent.
Some analysts had expected the central bank board to also lower its growth forecast at its meeting on Thursday, but the bank chief said it would hold off any modifications until its quarterly inflation presentation in August.
The government is also in the midst of funding a raft of complex reintegration and social projects following a peace deal with the Revolutionary Armed Forces of Colombia (FARC) rebel group to end more than 52 years of war.
The budget includes 2.4 trillion pesos ($799 million) for post-conflict programs, Cardenas said, a 31.5 percent increase over this year. ($1 = 3,002.94 Colombian pesos) (Reporting by Nelson Bocanegra, Carlos Vargas and Julia Symmes Cobb; editing by Grant McCool)