[Source: Reuters]

Plenaries in Colombia’s lower house and Senate both approved a request from the leftist government of President Gustavo Petro to increase the debt ceiling to $17.6 billion to finance its development plans and comply with payment terms.

The vote comes amid warnings from analysts about the state of the Andean country’s fiscal needs and after Petro said last month that Colombia could stop paying its debts or enter an economic emergency if the ceiling was not increased, comments later softened by Finance Minister Ricardo Bonilla.

Economic committees from both the lower house and the Senate approved the request last week.

“This gives clear rules going forward about how to manage public credit,” Bonilla said after the measure was approved.

A recent slump in tax collection has set off alarms over how authorities will cover a budget shortfall estimated by analysts at about $7 billion this year. The government has already said it will cut spending by some $5 billion.

An independent oversight committee has warned Colombia will not meet its fiscal rule – a 2011 measure designed to prevent deterioration of public finances – this year, citing lower economic growth, potential impact on tax revenue and high debt.

Bonilla told lawmakers during hearings on the debt ceiling that the country’s current ceiling would have meant a deficit of $1.37 billion for 2024.

Petro has promised ambitious reforms to labor laws and healthcare in an effort to right what he says are centuries of entrenched inequality.

Lawmakers on Friday approved a pension reform the government says will strengthen state pension fund Colpensiones, reduce subsidies and increase coverage for those without sufficient savings.

The government’s four-year development plan, approved last May, aims to cut the percentage of the population living in extreme poverty to single digits, secure a transition to clean energy and hand over millions of hectares to poor farmers. It has a cost of around $300 billion.

The finance ministry has said the debt ceiling respects government deficit projections, which were revised upward to 5.6% of GDP last week.