The Colombian peso's devaluation has significantly impacted the country's external debt, which reached US$197.5 billion in July 2024, according to the Central Bank of Colombia.
This amount constitutes 48.7% of the GDP, with public debt exceeding US$113 billion and private debt at US$84 billion, translating to 27.9% and 20.8% of the GDP, respectively. Compared to the beginning of the year, the external debt has increased by US$39 million.
At today's exchange rate, this equates to approximately 163.5 billion pesos (US$29.2 million). Colombia's debt-to-GDP ratio of 48.7% positions it moderately among Latin American countries, lower than Argentina (156.7%), Brazil (89.1%), and Mexico (50.3%), but higher than Chile (45.9%) and Paraguay (29.4%).
The average public debt-to-GDP ratio for Latin America and the Caribbean reached 73.7% in 2023, indicating Colombia's relatively better fiscal position. The Inter-American Development Bank recommends maintaining a prudent debt level between 55% and 44% of GDP, a range within which Colombia's ratio falls.
However, the peso's devaluation complicates the financial landscape. The dollar started the year at 3,882.05 pesos and rose to 4,148.04 pesos by July, reflecting an increase of 325.99 pesos. As of today, the exchange rate stands at 4,192.56 pesos per dollar, pushing the external debt to approximately 828.18 trillion pesos (US$147.89 billion).
The dollar has remained above 4,150 pesos for 17 consecutive trading days. Global factors, including U.S. inflation at 2.4% in September, have influenced this trend. Despite a slight downward movement in recent days, the peso has not broken the 4,150 barrier.
Catalina Tobón, strategy manager at Skandia, attributes the dollar's strength to both global and regional factors, including the Federal Reserve's cautious approach to interest rate cuts and concerns about fiscal sustainability in Colombia.
Sebastian Toro, founder and CEO of Arena Alfa, notes that Colombia's currency is closely linked to movements in Brazil and Mexico. Ongoing uncertainty surrounding Mexican elections and Brazil's economic situation has kept regional currencies elevated.
Despite these challenges, the Ministry of Finance has assured that Colombia will honor all its debts, albeit executing less of its budget than originally planned to comply with fiscal rules, as reported by Banco de Bogotá.
Colombia's moderate debt level reflects a balance between various economic factors, positioning it as a relatively stable economy in the region, even amid the challenges posed by currency devaluation.