Colombia Faces Budget Adjustments to Meet Fiscal Rule

Colombia requires a budget adjustment of 56 trillion pesos in 2023 to comply with its fiscal rule. Further adjustments may be needed in 2025 due to tax collection risks. The fiscal rule aims to prevent public finance deterioration. The government is cutting budgets and exploring additional measures.

Colombia is facing significant budget challenges, with an expert committee recommending a 56 trillion peso adjustment to meet its fiscal rule for this year. The report from the Autonomous Fiscal Rule Committee (CARF) also suggests a potential 39 trillion peso adjustment for 2025.

Amid ongoing fiscal difficulties, the Colombian government has already reduced its 2024 budget and is considering a further 33 trillion peso cut. In June, the finance ministry announced a 20 trillion peso budget reduction due to lower than anticipated income.

CARF has previously warned of additional fiscal adjustments necessary to maintain compliance with the fiscal rule beyond 2024, citing risks to tax collection targets. Established in 2011, the fiscal rule mandates keeping public debt at 55.3% of GDP in 2024, rising to 56.4% in 2025.

(With inputs from agencies.)