Borrowing in pesos or dollars?: the risks and costs for the budget due to the increase in public debt

TL;DR

Colombia has issued record amounts of debt in pesos and dollars amidst high interest rates and budget pressure.
The cost of foreign currency debt and interest rate behavior will significantly impact Colombia's fiscal margin.
Public debt servicing has grown consistently since 2010, with interest payments becoming the primary driver of this increase since 2018/2021.
A larger portion of the budget is now allocated to financial costs of past debt, reducing funds for other public spending.
Public debt levels remain above pre-pandemic figures despite some correction.
Financing in dollars or pesos carries different conditions, with local investors factoring in devaluation risk.
Exchange rate fluctuations and rising sovereign bond rates are increasing financing costs.
High interest rates are projected to lead to greater future interest payments, reducing fiscal space and increasing sensitivity to economic shifts.

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