Finance Minister Ricardo Bonilla stated that if an agreement on diesel price increases cannot be reached with transporters, the adjustment will need to be made unilaterally. “We cannot keep it frozen,” said the Ministry of Finance.
During an event in Manizales, Minister of Finance and Public Credit, Ricardo Bonilla Gónzalez, spoke about the impending increase in diesel prices for this semester.
Although there are no agreements between the government and transporters, Minister Bonilla revealed that there is one final meeting scheduled to discuss the increase in diesel prices. He also mentioned that representatives from the transport sector were unable to attend the meeting planned for August 8.
In the absence of an agreement, Bonilla indicated that the increase would be unilateral. “There is a need to adjust the price. We cannot keep it frozen,” stated the minister. It is important to note that without an adjustment in diesel, this year’s deficit in the Fuel Price Stabilization Fund, Fepc, is projected to reach $11.6 billion. Currently, the average price of a gallon of diesel is $9.456, and to align with international price adjustments, it could increase by $6.000.
Call for Rate Reduction
With a decline in inflation in Colombia, Minister Bonilla González urged the Bank of the Republic to lower interest rates by 75 basis points in the next meeting, recommending that the rate be maintained at 10%, down from the current 10.75%.
As of July, Colombia’s annual inflation reached 6.86%, falling below the 7% mark after months of stagnation. In light of this result, Minister Bonilla emphasized that the real rate stands at 3.89%, which could justify further reductions.
Despite improvements in inflation figures, Colombia still has one of the highest inflation rates in the region, excluding exceptional cases like Venezuela and Argentina.
You may be interested in: Bucaramanga is the fourth city with the highest inflation in the last year
📊 According to @ibgecomunica inflation in 🇧🇷 rises in July 2024 to 4.5%, from 4.2% in June. This is how the year-on-year inflation in LATAM looks like in July 2024:
🇨🇴 6,86% @DANE_Colombia
🇲🇽 5,6% @INEGI_INFORMA
🇺🇾 5,4%
🇨🇱 4,6%
🇧🇷 4,5%
🇩🇴 3,5%
🇧🇴 4,0%
🇵🇪 2,1%Special cases:
🇦🇷 271,5
🇻🇪 51,4 pic.twitter.com/8lTJbNThxZ— Diego Montañez-Herrera (@DiegomontanezH) August 9, 2024
Will it Grow at 2%?
Speaking at a forum in Manizales, the head of the Treasury Department addressed economic growth expectations for this year. Bonilla noted that these expectations have improved; at the beginning of the year, growth was estimated at 1.3% of the Gross Domestic Product (GDP), while recent predictions from various entities, including the Bank of the Republic, now suggest growth between 1.7% and 1.8%.
“We started the year with a pessimistic forecast, with many saying growth could be as low as 1.3% after a mere 0.6% in 2023. We are currently looking at 1.7% – 1.8%, and if this trend continues, we could approach 2%, putting us on track to recover to 3% by 2025. The partial indicators provided by DANE show improvements across various sectors,” stated Minister Bonilla.
Regarding economic recovery, Minister Bonilla stressed the importance of collaboration between the private and public sectors, emphasizing the need for increased contributions from the business sector.
“Eighty percent of this country’s investments come from the private sector, so discussing economic reactivation cannot solely depend on government initiatives. The government plays a role, but the bulk of the investment comes from the private sector. We need to revitalize the construction of civil works and housing. We should enhance tourism beyond what we have experienced. Moreover, renewable energies must become a primary focus,” explained Minister Bonilla regarding the path to reactivation.
Finance Minister Ricardo Bonilla said that if there is no agreement with transporters on the increase in diesel prices, the adjustment will have to be made unilaterally. “We cannot keep it frozen,” said the Ministry of Finance.
At an event held in Manizales, the Minister of Finance and Public Credit, Ricardo Bonilla González, referred to the pending increase in the price of a gallon of diesel for this semester.
Although there are no agreements between the Government and the transporters, Minister Bonilla revealed that there is one last meeting to agree on the increase in the gallon of diesel fuel. He also said that the representatives of the transport sector were unable to attend the meeting scheduled for August 8.
In the event of no agreement, Bonilla anticipated that the increase will be unilateral. “There is a need to adjust the price. We cannot keep it frozen,” said the minister. It should be remembered that if there is no adjustment in gallons of Acpm, This year’s deficit in the Fuel Price Stabilization Fund, Fepc, will reach $11.6 billion. On average, a gallon of diesel is at $9.456, and to reach the international price adjustment it could rise by $6.000.
Call for Rate Reduction
Inflation in Colombia has eased and with these results, Minister Bonilla González asked the Bank of the Republic to reduce the interest rate by 75 basis points for the next meeting. That is, to keep the rate at 10%, since it is currently at 10.75%.
With the July result, the country’s annual inflation reached 6.86%, falling below the 7% barrier after months of stagnation. In light of this result, Minister Bonilla stressed that the real rate is at 3.89%, which would warrant further reduction.
Although inflation results have improved in the country, Colombia maintains one of the highest inflation rates in the region, not counting cases such as Venezuela or Argentina.
You may be interested in: Bucaramanga is the fourth city with the highest inflation in the last year
📊 According to @ibgecomunica inflation in 🇧🇷 rises in July 2024 to 4.5%, from 4.2% in June. This is how the year-on-year inflation in LATAM looks like in July 2024:
🇨🇴 6,86% @DANE_Colombia
🇲🇽 5,6% @INEGI_INFORMA
🇺🇾 5,4%
🇨🇱 4,6%
🇧🇷 4,5%
🇩🇴 3,5%
🇧🇴 4,0%
🇵🇪 2,1%Special cases:
🇦🇷 271,5
🇻🇪 51,4 pic.twitter.com/8lTJbNThxZ— Diego Montañez-Herrera (@DiegomontanezH) August 9, 2024
Will it Grow at 2%?
At a forum in Manizales, the head of the Treasury Department referred to the economic growth prospects for this year. Bonilla took the opportunity to mention that expectations have been improving, since at the beginning of the year it was estimated at 1.3% of the Gross Domestic Product, GDP; and recently several entities, including the Bank of the Republic, estimated that growth would range between 1.7% and 1.8% of the GDP.
“We started the year with a pessimistic forecast, everyone said it could be 1.3%, after 0.6% in 2023. We are already at 1.7% – 1.8% and if things continue as they are we could be around 2%, recovering the path of 3% in 2025. The partial indicators provided by DANE indicate that there is improvement in the different sectors,” said Minister Bonilla.
Collaboration for Economic Growth
Regarding economic recovery, Minister Bonilla himself stressed that synergy with the private and public sectors is necessary, with a greater contribution from the business sector.
“This country is 80% privately invested, so talking about reactivating the economy cannot simply be an expectation of what the Government can do. The Government contributes a piece, but the majority of the share is provided by the private sector. We need to reactivate the construction of civil works, housing. We need tourism to go beyond what we have had. We need renewable energies to become a main objective,” explained Minister Bonilla in his explanation of the direction of the reactivation.
Key Strategies for Economic Recovery
- Investment in Infrastructure: Focus on developing new civil projects and enhancing transport infrastructure.
- Tourism Enhancement: Promote Colombia as a tourist destination to attract international visitors.
- Renewable Energy Investments: Shift towards sustainable energy sources to create job opportunities and reduce reliance on conventional energy.
- Public-Private Partnerships: Encourage collaboration between government entities and private firms to stimulate growth.
Fuel Price Stabilization Fund and its Implications
The Fuel Price Stabilization Fund (Fepc) has become a pertinent topic in discussions about the economic impact of diesel price adjustments. Inadequate funding can lead to higher transportation costs, affecting the cost of goods and services across various sectors. A unilateral increase in diesel prices without proper negotiation may aggravate inflationary pressures, particularly in a country already grappling with high inflation rates.
Potential Impact of Diesel Price Increase
| Impact Area | Estimated Effect |
|---|---|
| Transport Costs | Increase by up to 10% |
| Consumer Goods Prices | Inflation may rise by 1-2% |
| Economic Growth | Potential slow-down depending on price adjustments |
