Recently, the President Gustavo Petro spoke about the possibility of issuing bonds by the Bank of the Republic to financially repair the victims of the internal armed conflict in the country.
“The issuance routinely made by the Banco de la República, instead of going to the banks, should go to bonds for the compensation of victims of violence in Colombia and I think we would shorten the time”, said the first president.
(Issuer Bonds, Petro’s alternative to compensate victims).
According to Victim Care Unitit’s almost 10 million people registered as victims of violence in ColombiaTherefore, carrying out this proposal can pose a very big challenge for the Nation’s finances, to the point that it can be considered not only as something highly inadvisable, but can, in one way or another, endanger the the help these people receive.
(Menstrual leave: details of the project that reaches Congress).
In accordance with Óscar Cardozo, Economist and Investment Banking Analyst Valúes AAAdeveloping this measure can generate an imbalance in the accounts of the State, taking into account that of the annual budget of Colombia, which is around 400 billion pesos, 301 billion would be destined for the victims, as explained by the Minister of Finance and Public Credit, José Antonio Ocampo for the time.
(Public debt interest rate was below inflation).
“It is not highly recommended, since it would damage, firstly, trust, and secondly, the debt starts to become a bigger issue and also calls into question the fact that certain benefits have already been delivered to the victims of the armed conflict and many of them have not received”, he emphasized.
This agrees with the concept of Hernando Zuleta, professor at the Faculty of Economics of the Universidad de los Andeswho affirms that this initiative can only be approved by consensus of the Issuer’s Board of Directors, something that has not happened, even during the pandemic.
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“The idea that the Bank of the Republic finances public spending directly is very unlikely to be seen. For this to happen, there would have to be a consensus among all the members of the Board of Directors to give this direct credit to the Government“.
Nevertheless, not carrying out this proposal would also represent the need for the State to obtain new sources of financing to solve this proposal and not affect the image that the Government has at the national and international level, as well as the reparation to the victims.
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“Otherwise, new financing alternatives would have to be sought to be able to compensate the victims without affecting international credibility so as not to generate more problems.Cardozo emphasized.
On the other hand, if this proposal is carried out, this may have negative effects for the economy, taking into account the consumer’s price indexwhich closed the month of March at 13.34%.
“lThe fundamental reason would be that the signal would be sent that the Banco de la República is willing to finance a government that wants to spend a lot, which would give the markets a bad feeling, which would have a very important inflationary effect.”, Zuleta clarified.
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