Colombia to Cut Tariffs on Almost 200 Items to Fight Inflation
(Bloomberg) -- Colombia will reduce tariffs on almost 200 items likely starting next week as part of efforts to help curb the fastest inflation since 2016, according to one of the nation’s top economic policy makers.
Those import tariff cuts will be mostly in the agriculture sector, Finance Minister Jose Manuel Restrepo said in a Bloomberg Television interview on Wednesday with Shery Ahn. Food prices drove Colombia’s inflation in January, accelerating 20% from a year earlier, according to government statistics.
Colombia’s economy grew 10.6% in 2021, topping forecasts in the fastest expansion since at least 1906. The finance ministry sees some momentum continuing this year, with gross domestic product expected to rise 5%, which would be the most among major Latin American peers.
Annual inflation is surging above target, prompting the central bank to hike its interest rate.
Restrepo, who chairs the central bank’s board, said policy makers need to continue with the tightening cycle to control rising prices and inflation expectations. At the same time, they should “take into account, of course, that if we increase a lot, that’s going to be against the economy,” so there needs to be an equilibrium, he said.
Annual inflation accelerated to 6.9% in January, more than double the central bank’s 3% target. Economists see consumer prices only easing to 5.44% by the end of the year.
Policy makers have raised borrowing costs by 2.25 percentage points since September to 4%. Analysts surveyed by the central bank see the key rate hitting 6.5% by June.
Colombia’s fiscal numbers have improved faster than the government initially expected, Restrepo said.
The finance ministry said earlier this month that central government debt started to fall in 2021, three years before forecast, dropping to 63.8% of gross domestic product from 64.7% in 2020. The Andean nation now sees the fiscal deficit narrowing this year to 6.2% of GDP from 7.1% in 2021.
“Colombia needs to continue on that track,” Restrepo said.
Colombia is holding presidential elections on May 29 with a likely runoff three weeks later. Former Bogota mayor Gustavo Petro, who is leading in polls, is popular among poorer Colombians and has pledged to increase taxes on the rich and halt oil exploration.
Restrepo said investors shouldn’t worry if the next government is right or left-leaning, as the winner will preserve both the nation’s institutions and democracy.
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