For public opinion it is known that President Gustavo Petro does not share the position adopted by the Bank of the Republic during his administration, since although the authorities of the issuer have made it clear that his priority is economic stability in the long term through the control of inflation and macro indicators, for the head of state What they have done is to become a stick in the wheel of economic growth.
These differences have reached such an extent that after the April decision, Where the monetary policy rate was lowered by 25 basic points and remained at 9.25%, the president agitated the economic debate from his social networks, when blaming the central bank for the growth of public spending, one of the fiscal ailments of his government.
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“It is the internal debt that increases as public spending, and this is determined by the interest rate imposed by the Bank of the Republic”; He said in his X account. The phrase, apparently technical, has a political and economic burden in the background, since he suggests that part of the deterioration of public finances is not direct responsibility for his government, but of the issuer.
This statement did not go unnoticed and several high -profile economists presented their arguments against, so Portafolio consulted some of them and with analysts from the financial market, who warned that blaming the Bank of the Republic could be a fiscal smoke curtain, a convenient narrative to avoid recognizing excess expenditure, The low collection and loss of credibility that the State accounts are going through.
President Gustavo Petro
COLSIDENCIA C – YT
Half truths
Although the president’s argument has a real starting point and that when interest rates are high, the cost of borrowing, including that of the Government, rises and the public debt titles (tes) issued by the Nation must offer greater yields to be attractive, and this increases the amount that the State pays in interest, in the local economic context said statement must be handled with tweezers.
Likewise, although the debt service has come to represent up to 30% of the budget General of the Nation, the experts questioned the cause of these high rates, since it is not the Bank of the Republic who directly sets the rate of the tes, but the market, which incorporates risk perceptions on the fiscal sustainability of the country.
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That said, they explained that when confidence in economic management deteriorates, investors demand greater returns to provide to the Government, which is precisely what is happening and has taken at other times to the market also to speak about the need to generate confidence.
For José Antonio Ocampo, former Minister of Finance of the Petro Governmentthe president’s approach confuses the country and explained that there is an increase in interest expenditure, but that the biggest problem is the primary deficit, which reflects excessive expense before payment of interest; So you must start by adjusting the operating expense.
Fiscal Risks – Economics
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“The high interest rates of public debt, deep down, are also because of the country’s fiscal problems. Normally the interest rates of the tess or external public debt have nothing to do with the rates of the Bank of the Republic,” he said.
The Prime Minister of Finance that Gustavo Petro had in this mandate He added that he does not believe that monetary policy will be politicized, and that taking care of this aspect “does not mean that the President of the Republic cannot have his opinions on monetary policy or the Minister of Finance, which is also the one who presides over the Board. Several presidents in the past have also done”
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A similar reading has Gregorio Gandini, director of Gandini Analysis, for whom “the cost of the debt has risen more due to the perception of risk than by decisions of the issuer. The suspension of the flexible credit line (LCF) by the IMF and the high level of the CDs (country risk indicator) show distrust in fiscal management”.
Gandini indicated that blaming the bank is unfair and dangerous, especially if one takes into account that “the independence of Banrep It has been essential to maintain stability, politicizing it is a serious mistake. ”
Colombian pesos
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A repeated narrative
At this point it must also be said that the signaling to the Bank of the Republic is not new in Latin America and governments of lines similar to that of Gustavo Petro have used similar arguments to justify the need for spending and press their central banks to lower artificially interest rates. The result, in cases such as Argentina or Türkiye, has been inflation, capital escape and loss of monetary autonomy.
José Manuel Restrepo, former Minister of Finance and current rector of the EIA University, It was more direct and said that “the president is confusing causes with consequences. The rates do not rise because the Banrep imposes it, they go up because the country has lost credibility, largely due to excessive spending and the lack of clear signs of adjustment.”
He also warned that insinuating the subordination of the issuer to fiscal policy is a red line and that “when that happens, the country enters a dangerous spiral. If the bank loses independence, the markets are scared, the dollar goes up, Tes are further more expensive and inflation is uncontrolled. We saw that with the Kirchner in Argentina. ”
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Austerity or evasion?
For Andrés Moreno Jaramillo, an analyst of the financial sector, the fault is clear, warning that “this is a government that does not know how to spend well, it does not have an austerity policy. Thus the Bank goes down, that does not solve the problem. To blame the sender is simply to seek excuses.”
Moreno also points out that Banrep has already started a rate reduction cycle, But the effect on the cost of debt will be marginal while the country does not recover its credibility, since for it “it is not a matter of percentage points in the intervention rate, but of clear signals of fiscal discipline.”
Board of Directors of the Bank of the Republic
Bank of the Republic
Unfortunately, that discipline, for now, seems distant and proof of this is the recent pronouncement of the Autonomous Committee of the fiscal rule that warns that to correct the structural deficit, the government should cut up to $ 75 billion of the expense, in the worst of the tax scenarios raised for this year.
All this, while the Petro administration has avoided talking about cuts and advances in proposals such as increasing retention at the source to companies, which could further affect private investment.
More than the level of rates, the underlying problem is that the government is spending more than it collects, and is doing it Without a clear adjustment plan, so the fiscal bomb is not in the Bank of the Republic, but in the Executive itself.
