Overview

President Juan Manuel Santos began his second term in office on August 7th, 2014, which will end on August 7, 2018. After four years of negotiation and the approval of the six points of the agenda agreed in 2012: agricultural development policy; political participation; solution to the problem of illicit crops; victims of the conflict; end of the armed conflict; and implementation, verification and endorsement, the Colombian Congress approved on 30 November 2016 the new peace agreement between the Government of Colombia and the Revolutionary Armed Forces of Colombia (FARC-EP - Fuerzas Armadas Revolucionarias de Colombia-Ejercito del Pueblo). The agreement was signed on November 24 by President Santos and FARC leader, Rodrigo Londoño 'Timochenko', in Bogotá.

The Government and the FARC-EP initiated a definitive bilateral cease-fire on 29 August 2016, while the mobilization of the different FARC structures to the location areas covered by the agreement ended on February 18, 2017. After the concentration of the guerrillas, the process of abandoning the weapons continues, which will be verified by the UN Mission in Colombia.

Also, after three years of exploratory talks, the peace negotiation table between the Government and the National Liberation Army (ELN - Ejército de Liberación Nacional) was formally installed in Quito, on February 7, 2017. The delegations will address a six-point agenda: participation of society in peacebuilding process; democracy for peace; transformation for peace; victims; end of armed conflict; and implementation.

The economic adjustment to the major oil shock continued in 2016 and economic growth slowed to 2 percent. Colombia has faced one of the largest terms-of-trade shocks in the region and one of the largest in its history, estimated at about 4 percent of its Gross Domestic Product (GDP).

Nevertheless, the Colombian economy has been resilient to this shock, supported by the macroeconomic and structural reforms that have been implemented in recent years. In 2016, private consumption supported growth, although at a slower rate than expected.  The economic outlook was weaker, especially for the extractive industries, due to greater uncertainty and slow implementation in publicly financed projects, which caused a decline in investment. As a result of fiscal consolidation efforts, public consumption growth also slowed. The weakness of domestic demand and the strong depreciation of the currency led to a sharp contraction in imports. As a result, despite a marginal decline in exports, net exports contributed 1.6 percentage points to economic growth.

The services sector remained the main contributor to growth due to the dynamism of financial, commercial and construction services, which partially offset the fall in the extractive sector. For its part, the agricultural sector was affected by the El Niño phenomenon.

In the period 2017 to 2019, a recovery in economic growth is expected, driven by the recovery of non-oil exports and oil prices, and the 4G infrastructure program. Inflation is converging towards the target range.

The continued compliance with the fiscal rule, instituted for the first time in 2012, shows that fiscal management remains strong. In 2016, the central government's structural fiscal deficit was 2.1 percent of GDP, while the actual fiscal deficit reached 4 percent of GDP as it takes into account the economic cycle and oil prices. In this context, the 2016 tax reform and cost containment measures are essential to continue fiscal consolidation and create room for post-conflict spending.

Colombia's flexible exchange rate regime is one of the first lines of defense against external shocks. The Colombian peso depreciated about 80 percent between mid-July 2014 and February 2016, before appreciating in mid-March 2017. Despite the depreciation, non-oil exports grew more slowly than expected due to weak demand from major trading partners. The current account deficit adjusted more than expected to 4.4 percent of GDP in 2016, although oil exports continued to decline. This appreciation, coupled with the effects of a contractionary monetary policy and the dissipation of the effects of the El Niño phenomenon on food prices, contributed to a marked slowdown in inflation. Due to the decline in inflation to 5.2 percent in February 2017 and growing external uncertainty, the monetary authorities reduced the benchmark rate three times by 25 basis points since December 2016 to reach a level of 7 percent.

Last updated: April 05, 2017

 

The Country Partnership Framework (Fiscal Year 2016-21) aims to support the government's development goals and guarantee the quality of the World Bank Group's (WBG) financial, knowledge and convening services to respond to the specific development needs of Colombia. The program supports the government under three strategic pillars:

•Fostering Balanced Territorial Development;

•Enhancing Social Inclusion and Mobility through Improved Service Delivery; and

•Supporting Fiscal Sustainability and Productivity.

Colombia is IBRD’s 7th largest Bank borrower with US$9.5 billion in outstanding debt. The active portfolio includes 13 IBRD credit operations and 2 Global Environment Facility (GEF) projects with net commitments of close to US $ 3.6 billion.

Colombia also has a considerable Trust Fund portfolio with US$33 million represented in a variety of sectors.

Last updated: April 05, 2017

 

In FY16, 2 large Development Policy Financing operations for US$1.4 billion were approved.

The Bank supports Colombian efforts to improve public sector management in municipalities to reduce poverty and inequity. It also supports urban public transport; the post-conflict and peacebuilding process (mostly through a multi-donor trust fund), as well as long-term natural disaster risk management and a disaster risk financing strategy, through the Treasury Bank

In particular, the Bank is supporting Colombia’s efforts to improve public sector management in municipalities aimed at reducing poverty and inequity in the regions. It also supports urban public transport; the Post-Conflict and Peace Consolidation process (mostly through a Multi-Donor Trust Fund, of which the World Bank chairs the steering committee); as well as long term disaster risk management and a catastrophe risk financing strategy, through the Bank’s Treasury.

The Bank is also helping to strengthen the national protected areas in Colombia, through the coordination between government agencies and the local population.

In addition, as of December 31, 2016, 2.550 farms from 12 departments/87 municipalities in Colombia have benefited to date from the sustainable cattle ranching project. The farmers have received technical assistance in environment friendly cattle systems. There are 60,677 hectares under environment friendly cattle systems as of now.

Over the past 15 years, more than half a million higher education students in Colombia, especially those from vulnerable socio-economic backgrounds, have benefited from World Bank investment projects and have been able to access quality education through partnership with World Bank. The Higher Education Quality Access Program (ACCES - Acceso con Calidad a la Educación Superior) and the recently approved Access and Quality Program for Higher Education (PACES - Programa de Acceso y Calidad de la Educación Superior), which will benefit some 287,000 students, focused on supporting students from unfavorable socio-economic contexts As well as indigenous, Afro-Colombians, students from remote areas, and victims of armed conflict.

Last updated: April 05, 2017

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LENDING

Colombia: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments

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