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Colombia’s president has announced a hike in gasoline prices

Colombia’s president has announced a hike in gasoline prices
Pedro Chile
Photo: EFE/ Mauricio Dueñas Castañeda

President of Colombia, Gustavo PedroThis Sunday it announced an increase in gasoline prices in the country due to a “deficit in fuel price stabilization,” according to what it said was a departure from the previous government of Ivan Duque.

“The fuel price stabilization deficit that was not paid by the previous government was 10 billion (pesos) (about 2,300 million dollars) per quarter. That is almost 40 billion (about 9,200 million dollars) per year. Almost half of the national budget deficit. This happens by not raising the price of gasoline,” the President said. explained on Twitter.

Fuel Price Stabilization FundIt reports to the finance ministry, which is responsible for stabilizing the price of hydrocarbons by paying producers and importers the difference between international prices and prices in the domestic market.

This is to reduce the impact on Colombian consumers of gasoline price fluctuations in international markets.

Increased fuel, petrol or food?

“Half of the national budget deficit is due to increasing subsidies to consumers of gasoline,” said Pedro, who was sworn in as president on August 7. He wondered if it was worth subsidizing this fuel “when the child mortality rate is doubling due to malnutrition”.

“The flip side of not raising gasoline and increasing the fiscal deficit is allowing hunger and poverty to increase in Colombia. To reduce the impact on consumers, I propose to Congress to separate taxes on gasoline from the gasoline price index,” he said.

For this reason, he told “gasoline consumers” that Colombia would “resume the path of price growth, with no other objective than to reduce the irresponsibly accumulated deficit.” However, he clarified that “ACPM (petrodiesel) derivatives” will not be affected.

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“Congress can advance the debate on the structure of fuel prices and their indexation with international oil prices, including the purchase of oil at international prices by (state-owned company) Ecopetrol within the country,” he noted.

Defense of the previous government

Former Finance Minister José Manuel Restrepo, who held the position between 2021 and 2022, responded to Pedro. In the medium-term fiscal framework, he said it was clear that the previous government provided “14.2 billion pesos (about $3,263 million) before leaving the deficit” and left “28.5 billion (about $6,549 million) in the budget.” .”

“During the pandemic, by guaranteeing fuel price stability, inflation was curbed by an additional five percentage points, thereby affecting the recovery of the country’s most vulnerable and MSMEs. Similar processes were followed in many countries around the world,” explained the former minister.

Along these lines, knowing the financial cost, the Duke government has begun to propose “a process for an orderly, gradual and careful response to this reality,” which he explained was reflected in the budget “with short and long-term measures.”

According to Restrepo, the fiscal framework left behind by the previous government has the means to “build from what was built” and take a step forward in line with fiscal rule without compromising the vulnerable or economic recovery.”

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