Colombia: A Worsening Fiscal Outlook

As part of the Medium Term Fiscal Framework (MTFF) presented on Friday June 13, the Finance Ministry has announced wider fiscal deficits for 2025, 2026, and 2027 than anticipated at the beginning of the year. Colombia’s Ministry of Finance has activated the escape clause to legally exceed fiscal limits under the fiscal rule amid “ extraordinary ” pressures. However, this move is coupled with a three-year consolidation agenda. A reform package targeting COP 19 trillion in revenues, primarily through VAT exemptions and diesel pricing adjustments, is slated for July 2025. While the escalation of the deficit (to approximately 7.1% of GDP) and debt (to about 63.8% of GDP) raises alarms, the true test lies in maintaining fiscal discipline throughout 2026 and 2027 to restore compliance with the fiscal rule and preserve market confidence.