Source: Colombian Government Data
The national debt of the Republic of Colombia is counted as the money that has been borrowed by all levels of government. This is also expressed as “general government debt.” Not all public sector debts are included in the figure. The calculation of national debt does not include the debts of state-owned enterprises, or public utilities.
Private sector debt is never included in the national debt owed by all the organizations and individuals that are in Colombia.
The IMF reports on the economy of Colombia. It doesn’t include government guarantees given to other organizations by the government when it compiles national debt figures. It also doesn’t include obligations for future payments, such as pension obligations.
When the IMF records national debt it expresses is as a percentage of the national income. A country’s annual income is called the Gross Domestic Product (GDP) so the national debt figure is called the debt to GDP ratio.
The IMF-calculated debt to GDP ratio for Colombia in 2017 was 49.4%. This is a relatively low figure, which means that Colombia’s national economy is in good health.
The sum of government debts is also known as the “gross debt” of Colombia. The IMF also calculates a net debt figure. This is the gross debt minus all of the financial assets held by the government of Colombia. These assets are shares, bonds, cash, or precious metals. The tally of assets of the government doesn’t extend to buildings or other property.
The IMF calculated the net debt of Colombia as 41.3% of GDP in 2017. This is lower than the gors debt figure and indicates that the assets held by the government of Colombia are equal in value to 8.1% of the country’s GDP.
The Colombian government is currently running large budget deficits. This policy should pump more money into the economy and stimulate growth.
These large deficits are a cause for concern because they are occuring at a point in the global economic phase where most other governments are recovering from the effects of the 2008 global financial crisis and paying down their debts.
The government of Colombia has been running annual deficits every year this century, which means that the debt keeps getting bigger. To the government’s credit, the country has experienced a rapid rise in its GDP and has never experienced a fall in GDP over this century. The economy didn’t even suffer in 2008-2009 during the global financial crisis.
The steep rise in GDP has helped to keep the country’s debt to GDP ratio low, even though it rises every year as an amount.
Despite the very high deficits of recent years, the rate of growth in debt as a proportion of debt has been subdued, and even fell in 2017.
The constant rise in debt doesn’t seem to have damaged the economy of Colombia.
Despite having a relatively low debt to GDP ratio, Colombia’s government has a low credit rating. The most recent change in the ratings of the country occurred in February 2018 when Moody’s changed the outlook for its ratings from “stable” to “negative.” This means that the agency is tracking the economy closely to see whether it should lower its rating for Colombia.
Agency Rating Outlook Date Moody's Baa2 negative Feb 22 2018 S&P BBB- stable Dec 12 2017 Fitch BBB stable Mar 10 2017
The last actual rating change was downward. In December 2017, Standard & Poor’s changed it credit rating from BBB to BBB-.
The government’s recently large deficits could buoy the economy. However, if the debts created by those deficits don’t stimulate the economy into growth, then their repayments will be a drag on the country’s economy. Fortunately, as the debt to GDP graph in the previous section shows, the Colombian government’s stimulus strategy seems to have paid off, but it didn’t impress the ratings agencies.
The Ministry of Finance (Ministerio de de Hacienda y Crédito Público) is in charge of all of the finances of the government. The Ministry sets the annual budget and keeps an eye on the country’s other financial institutions. The Treasury (Tesoreria) is a department of the Ministry of Finance and it is directly responsible for managing Colombia’s national debt.
The Treasury sells government securities to a list of approved buyers. These are called the “primary dealers” and the initial offering of a new issue is called the “primary market. This sales process is conducted as an auction.
The primary dealers are expected to be market makers and place their allocations on the secondary market where the wider investor community and financial institutions can trade them.
The Treasury has two financing time horizons when it raises debt. These are:
Short-term financing is funded through Treasury bills. These are always issued for a period of one year minus one day and they don’t pay interest. Treasury bills are sold at a discount but repaid at full face value.
The typical Colombian bond is called a Treasury bond this is a fixed-value, fixed interest rate bond. The Treasury issues bonds with maturities of:
Treasury bonds are always denominated in Colombian pesos.
The Treasury also issues some bonds in foreign currencies. These are placed with a financial institution in the currency of the bond rather than sold at auction. The Treasury calls these bonds “global bonds.: These have been issues in US Dollars, Japanese Yen, and Euros.
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