(Bloomberg) -- Colombia’s bonds and currency dived after President Gustavo Petro threatened to “cease payments” if lawmakers refuse to approve an increase in the nation’s debt ceiling. 

If congressional committees don’t approve lifting the limit, “there will simply either be a ceasing of payments or I’ll have to declare an economic emergency,” Petro wrote in a post on X. “I won’t hesitate to do that.”

The president didn’t elaborate on which payments he would cease. The finance ministry said in a statement that it’s confident congress will pass the bill by June 20. The presidency didn’t reply to written requests for comment. 

Petro has sometimes rattled markets in the past, including with his criticisms of the central bank and by floating the idea of capital controls. 

Peso Drops 

The peso erased gains and became among the worst performers in emerging markets, while Colombia’s dollar notes also dipped across the curve, with bonds maturing in 2035 falling as much as 0.66 cents on the dollar.

Colombia’s local peso bonds initially plunged after Petro’s remarks, but then pared losses. 

“This law should be passed without any problem,” said Luis Fernando Mejia, head of the economic think tank Fedesarrollo. “That’s happened in every government.”

Congress raised the debt ceiling in 2009, 2013, 2015 and 2020, he said. 

“Noise from Colombia is likely to continue given the administration’s multiple frustrations and still long term ahead,” said Alejandro Cuadrado, a Latin America strategist at Banco Bilbao Vizcaya Argentaria SA. “And while we tend to fade it for the most part given the solid checks and balances in Colombia, they are likely to weigh on Colombian assets and the peso at times.”

Congress is currently discussing a bill to increase the country’s debt ceiling by $17.6 billion.

“He’s looking for any reason to declare an economic emergency,” said Camilo Perez, an economist at Banco de Bogota. “In the past, congress has always raised the debt limit without much trouble.”

--With assistance from Nicolle Yapur and Leda Alvim.

(Updates market moves. Adds comment in seventh paragraph.)

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