Petro government seeks OK for largest budget in Colombia's history
Aug. 13 (UPI) -- Colombia's Congress has begun to debate the 2026 national general budget bill, a proposal from President Gustavo Petro's government that totals $138.4 billion -- equal to 28.9% of the nation's gross domestic produce. If approved, it would be the largest in the nation's history.
The proposal calls for a 6% to 8% increase over the 2025 budget and prioritizes social spending, debt service and public investment programs.
Debate over the proposal comes amid strong criticism from oversight agencies and analysts because $6.53 billion of the budget depends on a tax reform that has yet to be approved.
The Comptroller General's Office warned the shortfall poses a significant fiscal risk, especially since the government already has invoked an escape clause in the fiscal rule through 2028, allowing it to temporarily expand the deficit and debt beyond legal limits.
In early August, the International Monetary Fund said Colombia's economy "is navigating a complex landscape." The IMF noted that "although growth has strengthened and inflation has declined, fiscal challenges remain and private investment continues to be restrained." The government's deficit rose from 4.2% of GDP in 2023 to 6.7% in 2024.
As a result, gross public debt reached 61.2% of GDP at the end of 2024, approaching the fiscal rule's ceiling of 71% of GDP.
"This underscores the need for sustained medium-term efforts," the IMF said.
While the imbalance was not caused solely by Petro's administration, public spending has increased considerably during his tenure, particularly in operating expenses, as reflected in national budgets.
This has kept government spending at levels similar to or higher than during the COVID-19 pandemic, but without any extraordinary event to justify it -- a predicament that worsens the deficit.
In Colombia's current situation, boosting state revenue is among the most urgent priorities. Officials have discussed a more efficient and equitable structural tax reform, which could include changes to the value-added tax in certain sectors and a review of the personal income tax.
José Manuel Restrepo, who served as commerce and finance minister under former President Iván Duque, criticized the activation of the fiscal escape clause. Regarding the tax reform needed to support the budget, he said it will not pass Congress.
"So where will the $6.53 billion come from? Most likely from reduced investment," he said.
"The country does need its wealthy to pay taxes, because the excessive debt left by Duque must be paid -- and not with the money of working people," Petro said on X.
Another key factor is building confidence among markets and credit rating agencies.
"For this, the government must be transparent in its fiscal projections and actions. Implementing a credible fiscal strategy with achievable goals is crucial to maintaining macroeconomic stability," economist Juan Carlos Gainza of Trading Colombia said.
"The fiscal rule plays a vital role as the main tool for disciplining public finances and preventing excessive debt. But compliance is becoming increasingly difficult amid spending pressures and the need to finance a range of social and economic programs," Gainza said.
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The Hill
26 minutes ago
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UPI
an hour ago
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Air Canada ordered to resume operations during binding arbitration
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UPI
an hour ago
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Hundreds of 'Fight the Trump Takeover' protests held nationwide
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