IMF Warns Colombia’s Public Debt Continues to Grow and Is ‘Not Sustainable’

The International Monetary Fund (IMF) has issued a warning regarding Colombia’s growing public debt and declared it to be unsustainable. According to Nigel Chalk, director of the IMF’s Western Hemisphere Department, Colombia’s primary deficit stands at 3.5% of its GDP, while the country’s public debt amounts to about 60% of its GDP, and this figure is continuing to rise. Chalk emphasized that this situation is neither sustainable nor viable during the IMF’s annual meetings in Bangkok, Thailand.

The primary deficit measures the difference between government revenue and spending before accounting for interest payments on debt. A deficit of this size indicates that the government is spending more than it collects in revenue even before covering its financial obligations. As debt increases, the government must allocate more resources to interest payments and refinancing obligations, which can limit budgetary space for public investment, infrastructure, and social programs.

Additionally, rising borrowing costs may occur if market confidence in Colombia’s fiscal outlook diminishes.

The IMF’s concerns go beyond the current level of public liabilities to the trajectory of Colombia’s public finances. In September, Deputy Managing Director of the IMF, Nigel Clarke, visited Colombia, meeting with Vice President Jose Manuel Restrepo and Finance Minister Miguel Gomez. The IMF is engaged in discussions with Colombian authorities to explore possible forms of support, including technical assistance, economic advice, and potential financing.

However, no final decision on financial assistance has been made, and its potential scope and conditions will be discussed during upcoming negotiations.

Chalk acknowledged the Colombian government’s willingness to address the fiscal challenges, stating that the IMF believes the authorities are committed to tackling the country’s fiscal issues. Meanwhile, the IMF’s economic projections for Colombia indicate moderate growth, with an expectation of approximately 2.25% growth in 2026 and 2.3% in 2027.

While this growth suggests continued expansion, it may not be sufficient to alleviate the fiscal problems without a significant effort to reduce the deficit. A stronger and more sustained economic performance could boost tax revenues, support job creation, and decrease the debt burden relative to the economy’s size. However, achieving this goal would also necessitate improvements in productivity, investment, and a credible strategy for managing public spending and increasing government revenue.