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(Bloomberg) — The Latin American development bank CAF plans to provide President-elect Abelardo de la Espriella’s administration with an unprecedented $9 billion in financing over the next four years, easing pressure on the nation’s strained public finances.
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The multilateral lender will help finance projects in areas including energy, infrastructure, public security and programs aimed at reducing inequality, CAF President Sergio Diaz-Granados said Friday.
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“We are going to support the president with actions and programs,” Diaz-Granados said, speaking alongside De la Espriella in Antioquia province in western Colombia. “This is the first step on a long road, and Colombia can count on CAF to set an example and help work miracles.”
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Diaz-Granados didn’t elaborate on the terms of the financing.
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Some of the nation’s sovereign dollar bonds rose after the announcement, with notes due in 2041 rising by 0.3 cent on the dollar to trade above 91 cents, according to indicative pricing data compiled by Bloomberg.
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De la Espriella, who takes office on Aug. 7, will inherit a wide budget deficit, rising debt-servicing costs and heavy financing needs. His vice president-elect, Jose Manuel Restrepo, traveled to Washington last week to meet with investors, multilateral institutions and US officials, presenting the incoming administration’s plans to restore economic growth and put the country’s public finances on a more sustainable path.
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Investors are closely watching how Colombia intends to finance its fiscal adjustment and manage upcoming debt obligations after years of widening deficits, and the suspension of its fiscal rule, or balanced-budget act.
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“This is a meaningful amount, and other multilaterals may follow suit,” William Snead, a strategist at Banco Bilbao Vizcaya Argentaria in New York, said. “This funding approach could reduce Colombia’s need to issue hard-currency bonds.”
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Earlier this week, CAF approved a financing package of $2 billion aimed at boosting development in eight countries of the region.
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—With assistance from Nicolle Yapur.
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English (US)