BOGOTA, June 4 (Reuters) - Colombia’s government is struggling to push a watered-down tax reform through a reticent congress as it tries to calm investor nerves and stay one step ahead of a potential credit rating downgrade that could come at any time, politicians and analysts say. Uncertainty over the reform proposal, whose original version was withdrawn amid widespread anti-government protests and legislator opposition, has already led S&P Global Ratings to lower its rating for the country, sparking fears Fitch and Moody’s will follow suit. Analysts at JPMorgan predict capital flight of up to $3.5 billion should another agency cut its Colombia rating, not including loss of potential incoming capital. Close to a third of Colombia’s public debt is held by foreign investors. Though many lawmakers agree a reform is needed to finance social programs and pandemic recovery, they are loathe to approve one before the current legislative session ends on June 20, comments by legislators and party leaders show. The country trebled its fiscal deficit to 7.8% of GDP in 2020 and must cover a deficit equivalent to some $25.8 billion in 2021. New finance minister Jose Manuel Restrepo, whose predecessor resigned following the withdrawal of the original reform, told Reuters last month the government would move ahead as much as possible in this session with a 14 trillion peso ($3.8 billion) reform. The new plan seeks much less than the original’s $6.3 billion and is stripped of controversial rises in sales tax and focused on higher taxes for companies and the rich. The reform has still not been formally presented, but the government could extend legislative sessions. “I think it will be difficult before June 20. This legislature is already dead,” lower house Green Party representative Katherine Miranda told Reuters. Miranda, who serves on Congress’ economic committee, said the government is trying to reach a consensus with parties and could present the proposal at the start of the new session in late July. “Wouldn’t it be better to wait until the next legislature so the (finance) minister and the central bank can look at which option is best to finance overriding social needs?” Liberal party head and former President Cesar Gaviria asked in a letter to Restrepo. Though the new plan is more likely to pass, it would be unwise to push ahead now amid continued protests, said Felipe Campos, head economist at brokerage Alianza. “It will depend on the velocity at which the protests move and on public order,” he said. “The risk is a Chile-style escalation which takes the economic debate completely away from the reform.” Campos gave the reform a 60% chance of passage this year. Looming 2022 elections are also a factor. “It’s not just the government trying to reassemble a coalition, but Congress seeing its immediate future in March elections, which will play into the reform,” said former finance minister Juan Carlos Echeverry, who sees a 70% chance of approval before September. While lawmakers and the government grapple over the timeline, investors are sounding the alarm about the consequences of a slow approval. “I have spoken to many clients and the message is of worry and frustration,” said Andres Abadia, head economist for Latin America at Pantheon Macroeconomics. “The urgency is that at any moment Fitch could cut the rating and there won’t be a turnaround in the short term, even if the reform is passed.” “As much as people want to invest in Colombian debt, if it loses investment grade, many will be obliged to sell without wanting to because of rules at their investment funds,” he said. (Reporting by Nelson Bocanegra and Carlos Vargas Writing by Julia Symmes Cobb Editing by Jonathan Oatis) Our Standards: The Thomson Reuters Trust Principles.