Colombia Faces Fiscal Struggles Amid Budget Revisions

Colombia is grappling with a significant budget shortfall, requiring a $9.2 billion adjustment this year. Despite substantial cuts, fiscal constraints persist. The government faces opposition to its tax reform and 2025 budget plans, challenging President Gustavo Petro's fiscal strategies.

In a bid to rectify ongoing fiscal woes, Colombia is set to adjust its budget by an additional $9.2 billion this year, according to the Autonomous Fiscal Rule Committee (CARF). This urgent measure follows President Gustavo Petro's prior announcement of a spending cut totaling $6.5 billion due to insufficient tax revenue.

The CARF has estimated that achieving compliance with fiscal spending targets, consistent with the fiscal rule, necessitates extra measures totaling approximately 40 trillion pesos. Established in 2011, the fiscal rule aims to safeguard public finances from deterioration by imposing policy constraints.

Further fiscal challenges loom for Colombia as the CARF forecasts a need for a fiscal adjustment of around $11.9 billion in 2025. Legislative rejection of a proposed $2.7 billion tax reform, deemed crucial by the government for future budget financing, poses significant challenges to President Petro's fiscal agenda. With lawmakers also opposing the 2025 budget proposal, Petro finds himself compelled to enact the budget unilaterally by decree.

(With inputs from agencies.)