The fulfillment of the fiscal rule in Colombia by 2028, one of the central goals of the medium -term fiscal frame about the high fiscal risk facing the country and questions the viability of the current Executive Plan.
In their publication, these analysts remember that the Colombian government presented its new MFMP in June with the aim of recovering the confidence of the markets after the suspension of the fiscal rule until 2028 and although the publication of the plan caused a drop of 110 basic points in the differentials of the TES, Oxford argues that the official projections are “optimistic” and assigns a significant weight to scenarios where fiscal consolidation is delayed or incomplete.
See here: They lie project that seeks to regulate use of artificial intelligence in Colombia
According to the document, compliance with the fiscal rule requires a deficit correction of 4 percentage points of GDP, to 3.1% in 2028 and says that although it considers that this goal is attainable, it would only be achieved if the next government, as of August 2026, is committed to the
Fiscal discipline.
Thus, in its base stage (45 % probability), the firm foresees That consolidation will begin with the new administration, given that the current Petro government “will not be able to approve its tax reform.”
Cutting spending is one of the measures recommended by experts before the fiscal crisis.
Chatgpt image
“The roadmap presented by the Ministry of Finance provides for an adjustment of 1.9 % of GDP expenditure, which would imply completely eliminating the subsidy of the fuel price stabilization (FEPC) and increase health contributions, in addition to alleged efficiency profits not yet specified,” they said.
On the other hand, they argue that the proposed income increase, which is about 2% of GDP, is based on the approval of a new tax reform this year (which was already rejected in the past by Congress) and in a greater collection linked to economic growth.
More information: With the income statement nearby, why is exogenous information not enabled?
Given this, Oxford considers this growth expectation unrealistic, especially because MFMP itself recognizes that the fiscal adjustment will begin in 2027 and in fact, the firm projects that Colombia’s economic growth falls to about 2% year-on-year in 2027-2028, from almost 3% in 2025-2026, as a direct consequence of fiscal hardening.
The report also doubts the political viability of measures raised, arguing that the current government only controls one third of the Chambers of Congress, which makes the approval of additional taxes unlikely before the legislative elections of March 2026.
Cutting spending is one of the measures recommended by experts before the fiscal crisis.
Chatgpt image
They also estimate that diesel subsidies be eliminated before the elections, given the social reactions that have caused in the past.
Stronger challenges
In its negative scenario (35% probability), the firm projects that consolidation is done at half the required rhythm, postponing compliance with the fiscal rule until 2030. In this case, the Net public debt would stabilize, but it would be on the edge of the legal limit of 71% of GDP.
Other news: Expansion, the bet of warehouses crown: in 2025 he hopes to open 2 new stores
“On the severely negative scenario (10 %), the political will would be even weaker, which would lead to the debt exceeding that limit from 2029 and cannot stabilize,” they said in the report.
Oxford also emphasizes that oil revenues have collapsed, going from representing 2% of GDP in 2023 to only 0.5% in 2025, due to the prohibition of new explorations of fossil fuels, which has impacted both growth and tax revenues. Meanwhile, primary expenditure has risen 2.3% of GDP from 2022 and transfers, 2.5%, while public investment has lagged behind.
Cutting spending is one of the measures recommended by experts before the fiscal crisis.
Chatgpt image
The firm indicates that Colombia currently has the premium for a higher term among emerging markets, a reflection of the distrust of the market against the tax management of the government. Interest payments would rise to a maximum of 5.5% of GDP between 2027 and 2028, and then begin to fall.
In the long term, Oxford also warns that growth prospects are limited Due to the weak increase in labor participation, low productivity and descent projected in the population of working age, which would grow only 0.4% per year by 2030, according to the UN (compared to 1.6% average of the last decade).
Also read: Income declaration: This should be handled by the conjugal company
Finally, the report highlights that the 2026 elections are a key risk and says that although Miguel Uribe Turbay leads the surveys after the attempt of murder he suffered in June, two candidates close to the ruling party, Gustavo Bolívar and Daniel Quintero, are among the five with more support; So if one of them assumes power and continues with a lax fiscal approach, “the debt would not stabilize and break the legal limit from 2029”.
Daniel Hernández Naranjo
Portfolio journalist
