Colombia proposes 15% spending cut to avert fiscal crisis

Key facts

• Government proposes cutting public spending by about 15%.
• Fiscal deficit projected to reach 9.4% of GDP by 2027.
• Around 70% of fiscal adjustment to come from spending cuts.
• Tax measures include wider VAT base and higher levies on tobacco, alcohol, and sugary drinks.

Colombia's government submitted a fiscal reform bill to Congress on Thursday, proposing significant spending cuts and tax increases to address deepening fiscal woes. The proposed "Rescue Law" aims to reduce public spending by approximately 15% and avert a further deterioration in public finances, which have been strained by rising debt and interest costs. Vice President Jose Manuel Restrepo described the bill as a necessary "rescue operation" to defuse a "time bomb" for 2027, noting that one in three tax pesos collected is now used to service public debt. The government stated that the fiscal deficit would reach an unsustainable 9.4% of GDP by 2027 under current assumptions.