BTN News: Navigating the approval of Colombia’s General Budget for 2025 has emerged as one of the most pressing and immediate challenges for President Gustavo Petro’s administration. While the budget approval process is typically routine, this year’s proposal faces significant hurdles. The crux of the issue lies in a substantial funding shortfall—12 trillion pesos—making this the second consecutive year a budget might be approved without clear certainty about the source of these resources. This fiscal dilemma is unfolding against a backdrop of liquidity issues within the government and a broader economic crisis that threatens to deepen if confidence in fiscal policy wanes.
The stakes are high. Signals of uncertainty, whether due to the funding gap or potential changes in critical areas like the tax framework or fiscal rule management, could exacerbate the country’s economic woes. Voices within the Capitol have already suggested sending the budget proposal back to the Casa de Nariño for restructuring, arguing that pushing through a budget with such a significant deficit would be unwise. However, a proposal to return the budget to the executive was recently defeated due to a lack of quorum, providing a small victory for the government. Nonetheless, the administration now faces the daunting task of consolidating a majority ahead of the first joint debate.
The budget shortfall has not only drawn criticism from experts and legislators but has also been overshadowed by the lingering fallout from the corruption scandal involving the National Unit for Disaster Risk Management (UNGRD), which has implicated Finance Minister Ricardo Bonilla. Senator Angélica Lozano of the Alianza Verde has voiced her concerns, stressing that the current figures are overly optimistic and calling for a thorough review to avoid further financial instability.
From the opposition, criticism is even more severe. Senator Carlos Méisel of the Centro Democrático has labeled the approval of an underfunded budget as irresponsible, especially without a clear understanding of the forthcoming financing law. Meanwhile, members of Cambio Radical have argued that pursuing a new tax reform amid the ongoing UNGRD corruption scandal sends a poor message to the public.
The government, however, remains firm in its defense of the 2025 budget, which is set at 523 trillion pesos and is framed as a necessary step for economic reactivation. Officials argue that the budget is designed to support critical sectors such as health, education, and infrastructure, while also ensuring fiscal sustainability and macroeconomic stability. Despite these assurances, concerns about increased public spending and significant cuts to investment persist, particularly given the country’s sluggish economic growth.
One of the most pressing concerns is the government’s ability to meet its revenue targets, with the National Directorate of Taxes and Customs (DIAN) falling short of its collection goals for 2024. This shortfall has only complicated the situation for Finance Minister Bonilla, who is currently exploring various options to close the funding gap. Among these is the proposed financing law, which is expected to include substantial tax components, though details remain sparse.
As the legislative debate over the budget intensifies, some lawmakers and experts suggest that the best course of action would be to reduce the overall budget amount to avoid passing a deficit-laden plan. Others argue that modernizing DIAN to improve tax collection, cutting unproductive government spending, and incentivizing private investment through strategic tax benefits could generate the necessary revenue without undermining economic confidence.
The 2025 budget proposal includes a 24 trillion peso increase in primary government spending, bringing the total to 344.4 trillion pesos. However, with tax revenues falling short—down 8.7% year-on-year as of June—the government’s ability to finance this increased expenditure is in serious doubt. The drop in tax revenues, particularly the 28.6% decline in June alone, has only added to the uncertainty.
The situation has prompted calls from various quarters, including the Autonomous Fiscal Rule Committee, for a significant reduction in government spending. The committee has recommended a 22.6 trillion peso cut to help balance the budget and ensure compliance with fiscal rules. This sentiment is echoed by the Comptroller General, who has urged the government and Congress to carefully consider how to address the budget shortfall.
In response to these growing concerns, Minister Bonilla has ruled out some of the more controversial revenue-raising measures, such as increasing the financial transactions tax (known as the 4×1,000) or adjusting the VAT. However, he has hinted at other strategies, including potential adjustments to the fiscal rule to free up additional resources. While these measures are still under consideration, they have already met with skepticism from the private sector and economic analysts, who warn that such changes could undermine confidence in Colombia’s fiscal stability.
As the debate over the 2025 budget continues, it is clear that the government faces an uphill battle in securing the necessary funding while maintaining economic stability. The path forward will require careful negotiation, strategic adjustments, and a commitment to fiscal responsibility to navigate the challenging economic landscape and ensure the country’s long-term prosperity.
