Wall Street gives mixed response to Colombia's fiscal plan

BOGOTA: Colombian economic officials received a mixed response from Wall Street this week after presenting a fiscal plan that sharply raises deficit targets, with some expressing confidence while others voiced scepticism.

The meetings, led by Vice President Jose Manuel Restrepo and featuring representatives from the country's Ministry of Commerce and Ministry of Finance, outlined budget plans for 2026 and 2027 that include higher borrowing in international and domestic markets and increased fiscal deficits.

* Bank of America said it perceived a firm political commitment to fiscal adjustment and a sensible plan for implementing it after meeting with officials and upgraded Colombia's external debt to "overweight" from "marketweight".

* The Colombian government recently raised its deficit target for this year to 7.2 per cent of GDP per cent from 5.3 per cent, as well as bumping its 2027 target to 9.4 per cent from 4.5 per cent.

* Government borrowing is seen increasing by over US$10.50 billion to some US$34 billion this year and jumping to US$71.66 billion in 2027, from a prior US$32.98 billion estimate.

* Investors consulted by Reuters lauded the new Colombian administration's transparency in its figures and fiscal goals but also expressed concerns.

* "I like the strategy (...) but there are concerns; we're in a situation where the foreign bond market is very complex and very sensitive, and it's difficult to guarantee relatively decent rates," a senior executive at an investment bank who participated in the meetings told Reuters.

* In a private note which Reuters had access to, another investment bank told its clients that "what we heard did not meaningfully alleviate our concerns," warning the plan would pressure yields and frustrate recovery.

* "We think the more realistic scenario is one where the adjustment that ultimately goes through is, at best, closer to 1.1 per cent of GDP," the note said.

* Investors are still awaiting details of a spending cut bill needed to reduce next year's deficit by about 2.0 percentage points.