Colombia decided to terminate the Flexible Credit Line (LCF) agreement that had with the International Monetary Fund (IMF) since April 2024. The measure was announced this Tuesday, September 30, by the Bank of the Republic and responds to the fact that, since last April 26, the multilateral body He had suspended access to these resources after the most recent evaluation of article IV.
In other words, the country maintained a line of support that it could no longer use and therefore, according to the issuer, it was chosen to cancel it definitively and thus adjust the financial relationship with the fund.
See here: TLc with the USA. It would be amended and the end of Israel, Petro said
It should be remembered that this agreement had been approved in April 2024 for a period Two years and for an amount of 6,133.5 million Special Rights of Giro (DEG), which was equivalent at that time to USD $ 8.1 billion. This agreement replaced another signed in 2022 and, like the previous ones, it was precautionary, that is, insurance to face external shocks, rather than a loan aimed at covering immediate financing needs.
The Bank of the Republic stressed that this decision comes at a time when the country has adequate levels of international liquidity and in which the reserves currently reach USD $ 65,500 million, a figure explained by the currency accumulation program made in 2024 for USD $ 1.5 billion, as well as the profitability obtained in the administration of the administration of the Portfolios, which added USD $ 4.5 billion between 2024 and the run of 2025.
The Bank of the Republic was calm with this turn in its fiscal policy.
From the entity it was insisted that the cancellation of the LCF does not alter the schedule of payments agreed with the IMF in previous years and that in particular, the commitment to pay in December 2025 is maintained in December 2025 the last quota pending the disbursement made in December 2020, which was the only withdrawal of resources under this modality.
It may interest you: Portfolio interview with former president Juan Manuel Santos
“The cancellation of the current agreement has no effect on the scheduleA of payments of the disbursement of the LCF that was carried out in December 2020. The payment of the only pending fee will be made in December 2025 as planned. The country continues in a constructive dialogue with the IMF for all aspects that they consider necessary, ”they said.
This transmitter movement could be taken as a message of trust in the country’s ability to manage its reserves and meet external commitments without depending on contingent financing lines. However, it also highlights the turn in the relationship with the IMF, which in its most recent evaluation was critical of tax management and with the suspension of the rule that limits the deficit.
IMF – International Monetary Fund
Despite this change, the Bank of the Republic clarified that Colombia maintains a constructive dialogue with the multilateral organism and He will continue to resort to his technical advice in the issues that are considered relevant.
Said all this, the decision to cancel the line reflects both the country’s confidence at its current levels of liquidity and the new conditions imposed by the fund itself, since with reserves in historical maximums and an already calendar payment commitment, Colombia closed this chapter of international financial support, although the link with the IMF will remain in force in other cooperation spheres.
Other news: With a new health model, 2.3 million people would have to change EPS
A necessary path
The Minister of Finance, Germán Ávila, stressed that the flexible credit line was a resource hired in the middle of the pandemic, with a disbursement close to US $ 5.8 billion that allowed to meet sustainability needs in social, business and financial sectors.
“These resources were used to guarantee support and subsidies at a critical moment, but also involved a heavy burden on the repayment,” he explained, while stressed that the terms of the credit were not favorable, since “it was a short -term loan that He had no exceptionally convenient rates and implied a very large risk from the government. ”
Cutting spending is a need that does not wait, according to experts.
According to its accounts, in the last two years the country had to allocate more than $ 20 billion to amortize the obligation, which became an additional pressure on the fiscal deficit, so it justified the decision to cancel the LCF also for the costs associated with keeping it active.
“Holding her was simply being paying onerous commissions that was not convenient Hold them, ”he said. He added that the fiscal strategy is now concentrated in the approval of the 2026 budget and in the new financing law, which seeks to“ close the fiscal gap and guarantee stability in the medium term, ”he said.
More information: COncue of Guns N ‘Roses in Vive Claro, from Bogotá: at risk of not doing?
For his part, the director of the Bank of the Republic, Leonardo Villar, clarified that the LCF was designed for extraordinary cases, such as that of the pandemic and that “it is designed to be used exclusively in absolutely exceptional circumstances, such as those in which it was used during the pandemic in the year 2020”. For that reason, he assured that his cancellation does not alter the country’s financing perspective.
Villar emphasized that Colombia no longer needed this tool as an additional support, since international reserves reach an unprecedented level and explained that “at this time we have a level of international reserves that has increased from Substantial way in the last two years, a level that exceeds USD $ 65,000 million. ”
Germán Ávila – Minister of Finance.
In his message, the director of the issuer sought to give peace to the markets and made it clear that “there is no expectation that the cancellation of the line will have relevant financial implications”, since it is a technical decision that reflects the current strength of external accounts and the confidence in the country’s ability to face risks without resorting to contingent support of the international organism.
Daniel Hernández Naranjo
Portfolio journalist
