LatinNews Daily - 30 July 2025

*Colombia’s Finance Minister Germán Ávila Plazas has presented the government’s draft budget for 2026, which sets out Col$557tn (US$134.7bn) in planned spending – up by 5.9% from the 2025 budget. This equates to 28.9% of GDP, down slightly from the 2025 budget in which spending amounted to 29.0% of GDP. Debt servicing costs for 2026 are calculated to be Col$102.5tn, equating to 5.3% of GDP, down from 6.2% of GDP in 2025. The budget proposal plans for a current account deficit of 2.5% of GDP, greater than the 2.3% deficit in the 2025 budget. These calculations are based on estimated GDP growth of 3.0% in 2026, up from a forecast of 2.7% for 2025. The planned expansion of the fiscal deficit follows the government’s suspension in June of the ‘fiscal rule’ which limits borrowing. In its statement detailing the budget proposal, the finance ministry said that “a fiscal adjustment that asphyxiates growth would put at risk the sustainability of the public debt: it would reduce the tax base and the country’s capacity to make payments”. The budget proposal will now go to congress for debate. President Gustavo Petro issued the 2025 budget by decree after congress refused to approve it due to a Col$12tn fiscal hole which Petro said would need to be covered by a tax reform that has not materialised, fuelling concerns about the government’s fiscal credibility.

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