Post by livinginmedellin on Jul 25, 2016 20:05:28 GMT -5
The Colombian currency declined the most among major currencies after Fitch Ratings changed the outlook on its rating for the country to negative and warned that it needs to pass tax changes to boost government revenue this year.
The peso dropped 1.7 percent to 3,001.1 per dollar at 10:56 a.m. in Bogota, the most among the 31 most-traded currencies tracked by Bloomberg.
Fitch revised the outlook on Colombia’s BBB rating, the second-lowest investment-grade level, to negative from stable according to a statement published on Friday when local markets were closed. The country’s high current account deficit versus peers increases the vulnerability to changes in investor sentiment and external financing conditions, while the general government’s budget deficit is estimated at 3.5 percent this year, above that of its rating peers at 2.5 percent, analyst Erich Arispe said in the statement.
“A net positive revenue measure and its successful implementation are critical to compensate the loss of oil-derived revenues (from an already low revenue base) and replace expiring taxes in 2018,” according to the statement.
The government is committed to a tight budget and structural tax reform, Finance Minister Mauricio Cardenas said after the report. “Not doing that would put at risk the BBB rating!” he said in a Twitter post.
At 3,000, the peso is at or very near equilibrium given current oil prices, Cardenas said on Friday. Oil dropped to the lowest in more than two months after U.S. producers increased drilling for a fourth week even as the market contends with abundant stockpiles.
Standard & Poor’s, which also rates Colombia at BBB, revised the outlook to negative in February, citing deteriorating growth prospects amid the tumble in oil prices and the need for fiscal reform.
See: www.bloomberg.com/news/articles/2016-07-25/colombia-peso-falls-most-among-global-peers-after-rating-warning
The peso dropped 1.7 percent to 3,001.1 per dollar at 10:56 a.m. in Bogota, the most among the 31 most-traded currencies tracked by Bloomberg.
Fitch revised the outlook on Colombia’s BBB rating, the second-lowest investment-grade level, to negative from stable according to a statement published on Friday when local markets were closed. The country’s high current account deficit versus peers increases the vulnerability to changes in investor sentiment and external financing conditions, while the general government’s budget deficit is estimated at 3.5 percent this year, above that of its rating peers at 2.5 percent, analyst Erich Arispe said in the statement.
“A net positive revenue measure and its successful implementation are critical to compensate the loss of oil-derived revenues (from an already low revenue base) and replace expiring taxes in 2018,” according to the statement.
The government is committed to a tight budget and structural tax reform, Finance Minister Mauricio Cardenas said after the report. “Not doing that would put at risk the BBB rating!” he said in a Twitter post.
At 3,000, the peso is at or very near equilibrium given current oil prices, Cardenas said on Friday. Oil dropped to the lowest in more than two months after U.S. producers increased drilling for a fourth week even as the market contends with abundant stockpiles.
Standard & Poor’s, which also rates Colombia at BBB, revised the outlook to negative in February, citing deteriorating growth prospects amid the tumble in oil prices and the need for fiscal reform.
See: www.bloomberg.com/news/articles/2016-07-25/colombia-peso-falls-most-among-global-peers-after-rating-warning