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Colombia Plans to Restore Fiscal Rule
August 28, 2026
-Vandit P
Colombia’s new government plans to restore the country’s fiscal rule starting in 2028 and introduce a “fiscal adjustment bill” aimed at reducing the deficit and contain rising debt-servicing costs. The fiscal rule, established by law in 2011, was suspended last year after President Gustavo Petro’s administration invoked an escape clause as the fiscal deficit widened sharply. The earlier move had contributed to credit downgrades by the rating agencies.
The current administration of Abelardo de la Espriella says it is presenting a more accurate assessment of public finances by recognizing previously underestimated liabilities. Based on the revised accounting, the government projects a fiscal deficit of 9.4% of GDP in 2027. The proposed fiscal adjustment bill aims to reduce the primary deficit by 2.2% of GDP. The government’s 2027 budget proposes a 16% spending increase to COP 635tn ($201bn), with debt-service costs rising more than 50% to COP 155tn ($49.7bn). Total borrowing is expected to reach about COP 239tn ($76.6bn). While economists view the planned spending cuts and fiscal-rule reinstatement positively, concerns remain over the scale of fiscal deficits in 2026 and 2027 and rising debt-to-GDP.
Colombia’s dollar bonds traded stable. For instance, its 5.625% 2044s were at 84.7, yielding 7.2%
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