Press Release No. 03/83

Press Release: IMF Completes First Review of Colombia's Stand-By Arrangement, Approves US$274 Million Disbursement

June 11, 2003

The Executive Board of the International Monetary Fund (IMF) today completed the first review of Colombia's performance under a two-year, SDR 1.5 billion (about US$2.1 billion) Stand-By Arrangement, which was approved on January 15, 2003 (see Press Release No. 03/04). The completion of this review enables the release of SDR 193.5 million (about US$274 million) to Colombia, bringing the total amount available to SDR 580.5 million (about US$822 million). So far the country has not made any drawings under the arrangement.

Following the Executive Board review of Colombia, Anne Krueger, First Deputy Managing Director and Acting Chair, said:

"The government of Colombia is carrying out a strong economic reform program aimed at encouraging faster economic growth and improving social equity. In particular, the government's program focuses on bringing the overall public sector deficit down through a wide range of initiatives, including several important structural measures such as tax, pension, and labor reforms. A lower fiscal deficit is essential to reduce gradually the public debt burden, which in turn will ease pressures on interest rates and stimulate growth.

"The government is to be commended for its strong commitment to economic reform. All performance criteria and structural benchmarks for end-2002 and end-March 2003 have been observed. This strong policy implementation has already helped to improve economic performance. The economy showed signs of recovery in the first quarter of 2003, with a slight decline in unemployment and renewed access to international capital markets.

"For 2003, the government is committed to reducing the overall public sector deficit to 2 ½ percent of GDP, and is prepared to implement contingency measures if necessary, to achieve this target. At the same time, the government intends to continue with key structural reforms, including further steps to strengthen expenditure management and modernize public administration. The central bank already raised its main refinancing rate by 200 basis points so far this year and is committed to taking further measures as necessary to control inflationary pressures.

"Colombia's economic reform program has helped reduce the risks to the economic outlook. Nonetheless, the authorities will need to sustain the implementation of the program in order to lay the basis for a durable recovery," Ms. Krueger stated.