June 19, 2019 / 6:34 PM / a month ago

Fitch director sees deterioration in credibility of Colombia fiscal targets

BOGOTA, June 19 (Reuters) - The credibility of Colombia’s fiscal targets are deteriorating, the director of Latin American sovereign ratings for Fitch said on Wednesday, as the economy of the Andean nation looks set to grow less than the government had predicted.

The comments by Richard Francis come a week after the finance ministry said it would keep its central government fiscal deficit target for this year at 2.4% of gross domestic product, even though it has room to expand it to 2.7%.

The ministry has reduced its capital market internal debt target for 2019 and projected it will sell between 15 and 20 trillion pesos worth of state assets in the next five years.

“The government says it will try to reach the original (fiscal) goal, that’s good, but there is still a deterioration in credibility,” Francis said at an economic conference in Bogota.

“Selling assets or privatizations...isn’t sustainable financing, it’s not just getting to the fiscal target, it’s how you get to the fiscal target,” he said.

Francis said the country’s current account deficit will be above 4% of GDP this year, one of the worst in the region, risking an increase in foreign debt.

In May Fitch adjusted the country’s sovereign outlook to negative from stable, saying risks to fiscal consolidation and the trajectory of government debt, the weakening of fiscal policy credibility, and increasing risk from external imbalances in Latin America’s fourth-largest economy brought the change.

“If we’re seeing that the government can keep improving fiscal policies to get to the target and stabilize the debt over GDP, which is rising, then we could raise the outlook. If the credibility deterioration continues we could lower the rating by a level,” Francis said.

Francis said there were doubts about whether economic growth could reach the figure predicted by the government.

“We have doubts that growth can reach the 3.6% the government is saying and don’t even mention 4%,” he said. (Reporting by Nelson Bocanegra and Carlos Vargas Writing by Julia Symmes Cobb Editing by Chizu Nomiyama)

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