Colombia's government reduces gasoline subsidy to ease fiscal burden
Business
Colombia's government reduces gasoline subsidy to ease fiscal burden
BOGOTA (Reuters) - Colombia's government has reduced the value of a fuel subsidy on gasoline as of Saturday in a bid to reduce the fiscal impact of the Andean country's Fuel Price Stabilization Fund (FEPC), it said.
Adjustments to fuel prices following changes to the subsidy will see gasoline prices rise by an average of 401 pesos a gallon - around 9 U.S cents - taking the average price of gasoline to 11,167 pesos ($2.40) per gallon, the energy ministry said in a statement late on Friday.
Diesel prices will remain stable, the energy ministry added.
Colombia's government is faced with the task of tackling the country's runaway FEPC to comply with the so-called fiscal rule, a measure established in 2011 which imposes constraints on fiscal policy to block deterioration of public finances.
"The increase in the price of regular gasoline aims to reduce the fiscal impact of the FEPC on the national government due to the dynamics of international prices of refined products," the finance ministry said in a separate statement late on Friday.
Last year, Colombia's Autonomous Fiscal Rule Committee (CARF), which oversees public finances, urged the government to include debt from the FEPC in its goals for tackling the fiscal deficit.
"A subsidy for fuels worth close to 40 trillion pesos a year is unsustainable," the committee said at the time.
The FEPC deficit is estimated to close 2023 at 28 trillion pesos, with the decrease driven by measures such as cutting the gasoline subsidy, a finance ministry spokesperson said.
Colombia's government is targeting a reduction in its fiscal deficit to 3.8% of GDP this year, down from 5.5% of GDP at the end of 2022.
($1 = 4,646.08 Colombian pesos)
