Such a low fiscal performance had not been observed since 1998. Colombia recorded its worst result in nearly 30 years, a situation that unions, analysts and various think tanks had been warning about for months.
The most recent report from the Autonomous Committee of the Fiscal Rule (Carf) shows that the primary balance adjusted by the economic cycle was in deficit and stood at -2.9% of GDP, above -2.7% recorded at the end of the 1990s. And although it sounds like a technical term, it is simpler than it seems.
José Ignacio López, president of Anif, explained that the primary balance is the difference between the Government’s income and expenses, not including the payment of interest on the debt. “If it is negative, it means that income is not enough to cover expenses and the Government must borrow more. If it is positive, there is room to pay debt or strengthen the fiscal situation.”
This indicates that the State is increasing spending disproportionately, which has increased country risk, debt costs and pressure on the fiscal situation.
“If one does the math more strictly, the deficit could be even higher in 2026. We think it is important to remind people that this is the metric usually used by risk rating agencies and analysts, because the primary balance really indicates whether the country needs to borrow more or if, on the contrary, it will be able to reduce its debt level,” López said.
He also warned that public finances have deteriorated at a time when there is no economic crisis to explain it. “Why is it adjusted by the economic cycle? Because in times of crisis, the fiscal picture is distorted: first, government income falls because the economy produces and sells less; and second, some expenses increase to support the affected sectors.”
This is important to keep in mind because, in some cases, the economy may do better, for example during a commodities boom.
“Oil goes up, coffee goes up, the Government collects more and it seems that the fiscal situation was fixed. But the question is: was there really any effort to improve the fiscal situation? And the answer is that, if there were no higher taxes or lower spending, the fiscal situation did not change due to a concrete action; it simply improved passively,” López explained.
Cesar Pabón, head of economic research at Corficolombiana, explained that, “we have not been hit by any recent financial crisis, but we do see that debt levels are almost at the same level, or even worse, than during the 1998 crisis.
And what one would expect in those circumstances, more than greater spending, is a fiscal adjustment, which is necessary because, otherwise, all these problems deepen and feed off each other.”
The expert said that Colombia is historically deficient for structural reasons.
