high inflation reached by the Colombian economy in January led the national government to take action. With a data of 1.67% for the monthwhich drove the annual CPI to 6.94%, the need to mitigate upward pressuresespecially due to the increase in food prices, was the breaking point for the Minister of Finance, along with other portfolios, to announce a package of decisions.
These include the reduction of production costs for agriculture and tariffs on the import of inputs, the increase in the supply of food production and also, increase the coverage of the Solidarity Income program to one million more households.
However, and although these additional stimuli will accompany the monetary policy actions that have already been promoting the Bank of the Republic for a couple of months with the increases in interest rates, these could take several months to take effect and would be reflected especially during the second half of the year and beyond.
“Being aware that this is an international phenomenon, we will most certainly have an increase in prices in the first months of this year, and in the second quarter of this year, as indicated by the OECD, there will be a reduction in prices at the global level.l”, highlighted the Minister of Finance, José Manuel Restrepo, who also indicated before the Blu Radio station that for the third quarter they should begin to lower the prices of some foods that have had high inflation.
Experts point out, however, that this effect on inflation will not be immediate and that for now it will continue to hit the pockets of households.
According to Isidro Hernández, professor at the Faculty of Economics at the Externado University, “at the moment the greatest pressure from inflation comes from food, so, by taking tariff-type actions and to encourage agricultural and livestock inputs, it will have no effect, since the crops that are going to come out in the first semester were produced with the value of last year’s inputs, which means that they already have that production cost”.
The teacher also pointed out how, although Tariff measures will slightly reduce the costs of imported inputsthat does not mean that the supplies will be available in the international market, because in addition to facing supply problems, they also have pressure from the transport logistics side.
“These decisions will not be seen in the movement of inflation until mid-September and October, already in the last quarter of the year, or even from next year. Well, they are highly concentrated in food,” said Hernández.
The Government announced the increase in the coverage to another million households in the Solidarity Income social program, which emerged in a pandemic.
Roberto Angulo, founding partner of the Inclusion SAS firm, highlighted how this proposal could be more efficient if, before expanding coverage, first adjust the amounts of the transfers to the increase in inflationsomething that only happens with Families in Action.
“I think the government’s proposal is late and incomplete, without taking away the relevance of including a million new families as beneficiaries in the Solidarity Income program,” said Angulo, who explained that it is, in the first instance, late because a year has already passed. of inflation where the poor lost purchasing power month after month.
“And it’s incomplete for a reason,” adds Angulo: “lMonetary poverty is measured on the flow of current income. In that order of ideas, if monetary transfers are going to be used to contain inflation, the current flow of all users should be increased, otherwise each point of inflation may be increasing the distance from the line”.
According to Angulo, the most effective way to affect that flow is by adjusting the amount of transfers for inflation. “I would propose a combination of adjustment to inflation of all monetary transfer values, and depending on the fiscal restriction, an increase in coverage, but that should also contemplate extraordinary transfers.”
According to Angulo, an articulated governance of monetary transfers is needed, and these decisions must be made together and not with isolated programs.
LAURA LUCIA BECERRA ELEJALDE