BOGOTA, Aug 3: Colombia’s incoming government expects the war-torn country to breach a key IMF budget deficit limit in 2002 and will negotiate a new accord with “realistic targets” as it pumps up defense spending.

Fabio Echeverry, economic advisor to President-elect Alvaro Uribe, told reporters Colombia would post a central government fiscal deficit of over 6 per cent of gross domestic product in 2002 — well above the 4.7 per cent target agreed under the terms of a $2.7 billion IMF accord expiring in December.

The central (government) sector deficit, not including industrial, commercial, decentralized institutions and local governments, will be above 6 percent of GDP, that is two percentage points above forecasts, Echeverry said.

Alberto Carrasquilla, Uribe’s designated deputy finance minister, said the incoming government would present a highly- anticipated tax reform proposal by Aug. 14, within a week of taking office, but offered no details.

He said Colombia would need to raise between 2.4 trillion and 2.8 trillion pesos in war bonds to fund an expansion in security forces within the first two years of government.

And Carrasquilla said a plan to slim the size of Colombia’s government, partly by merging ministries, would “initially” save the country 500 billion pesos.

—Reuters