Downgrades and deficits will be Petro’s legacy

COLOMBIA - Report 03 Jul 2025 by Juan Carlos Echeverry, Andrés Escobar Arango and Mauricio Santa Maria

Rumors began spreading last month that the government wanted to suspend the fiscal rule, not due to a true macroeconomic emergency, but because of a soaring deficit driven by the government’s expansive fiscal ambitions and flagging revenue performance. The only way out for an administration that could not be less interested in fiscal prudence was to do away with fiscal rule restrictions. The public was told that the 2025 deficit wouldn’t be 4.7% or 5.1% of GDP, but 7.1%.

Absent the fiscal rule, nothing prevents the government from producing an even larger deficit this year, and the 2026 deficit target of 6.2% of GDP also looks like an uphill battle. It will fall to the next government, which takes office in August 2026, to cope with the mess.

Of reform to primary spending, there’s no indication whatsoever about how to go about producing these savings. Government officials have no idea of what to propose, especially taking into account the spending pressures they will bequeath to the next administration: health care, pensions, electricity and fuel subsidies, and the upcoming Ley de Competencias.

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