Colombia’s deficit worse than feared, may need IMF support, analysts say

The budget bill submitted by Colombia’s new government to Congress revealed a fiscal outlook far worse than markets had expected for 2026 and 2027, analysts said on Friday, adding that the country may need support from multilateral lenders including the IMF.

President Abelardo De La Espriella’s administration proposed a 2027 budget totalling 634.9-trillion pesos ($203.6bn or about R3.2-trillion), above a previous estimate of 575.7-trillion pesos.

The government projected deficits of 7.2% of GDP for this year and as much as 9.4% of GDP for 2027, up from previous estimates of 5.3% and 4.5%, respectively.

“It’s a pretty complicated situation,” said Camilo Perez, head of economic research at Banco de Bogota, adding that the magnitude of the deterioration exceeded expectations.

DAVIbank’s chief economist Jackeline Pirajan said the wider-than-expected fiscal imbalance should force investors to recalibrate expectations and opens the door for a repricing of sovereign risk premiums.

XP Investimentos’ head of macroeconomic strategy for Latin America, Andres Pardo, expects Colombia to pursue a financing package with multilateral lenders, potentially including the World Bank, the Inter-American Development Bank (IDB), CAF and the IMF.

Colombia could seek a new arrangement with the IMF through a Precautionary and Liquidity Line, but “the possibility of a traditional IMF-supported programme cannot be entirely ruled out,” Pardo said.

The Colombian peso weakened 0.70% against the US dollar on Friday, while domestic government bonds came under pressure.