Colombian president Gustavo Petro’s government has proposed a national general budget bill that totals $138.4 billion that, if approved, would be the largest in the country’s history. Photo by Carlos Ortega/EPA
Colombia’s Congress has begun to debate the 2026 national general budget bill, a proposal from President Gustavo Petro’s government totaling $138.4 billion — equal to 28.9% of the nation’s GDP. If approved, it would be the largest in the nation’s history.
However, its feasibility depends on a yet-to-be-approved tax reform aimed at raising $6.5 billion by expanding the tax base to sectors such as vaping products and gambling, reviewing tax exemptions and making possible adjustments to the sales tax and personal income tax.
The government defends the measure as essential to ensuring fiscal stability, while oversight bodies and analysts warn that without it, the deficit and debt could grow unsustainably.
The proposal calls for a 6% to 8% increase over the 2025 budget and prioritizes social spending, debt service and public investment programs.
The Comptroller General’s Office warned the shortfall poses a significant fiscal risk, especially since the government has revised its fiscal deficit target for this year to 7.1% of GDP -up from a previous goal of 5.1%- and has already invoked an escape clause in the fiscal rule, 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 is not solely the responsibility of 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 situation 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. On 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,” President Gustavo 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.
