Carf warns that the country is increasingly far from being able to comply with the fiscal rule due to public spending
Public spending remains a risk front for the country. Photo: Image generated with artificial intelligence.
TL;DR
- Colombia is moving away from its fiscal rule due to persistent public spending growth.
- The fiscal situation deteriorated significantly in 2025, with a primary deficit of 3.5% of GDP, the highest in thirty years excluding economic crises.
- This deterioration was caused by increased spending, not a fall in revenues, particularly in transfers, pensions, health, and fuel price stabilization funds.
- The CARF estimates a fiscal resource shortfall of $31.1 trillion (1.6% of GDP) for 2026, making the government's targets unlikely.
- The committee warns that without structural decisions, public debt will continue to grow, compromising fiscal sustainability and macroeconomic stability.
- Current macroeconomic conditions, including strong domestic demand and persistent inflation, suggest an overheating economy, making high fiscal impulse inadvisable.
- The necessary fiscal adjustment to stabilize debt is estimated between 3.5% and 4.5% of GDP, significantly larger than historical adjustments.
- Potential impacts from pension and labor reforms, and minimum wage increases could further pressure public spending.
- Increased public debt may negatively affect the public debt market by reducing liquidity and increasing interest rates.