Fiscal crisis, a scourge that also affects Colombians' pockets

Colombia is experiencing one of the most complex fiscal situations in recent years. Although it maintains its investment-grade status, the deficit, debt, and political instability are beginning to be felt in the daily lives of citizens, threatening spending cuts and possible price increases for goods and services.

A recent report by Crowe Co., prepared by Juan Carlos Arbeláez , the firm's tax and legal partner, warns that the fiscal crisis is no longer just a concern for technicians and economists, but a problem with direct consequences for the cost of living, access to credit, and the continuity of key social programs.

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First, this analyst points out that the country closed 2024 with a fiscal deficit of 6.8% of GDP, exceeding the legal limit of 5.6%; a situation caused by a historic drop in tax revenue, which represented more than $18.5 trillion less than in 2023, and an increase in primary spending. Despite the cuts implemented, public debt climbed to 61.3% of GDP, and according to Fitch, could exceed 62% in 2026.

In light of this, Arbeláez warns that this situation "directly affects investment in social programs and infrastructure," adding that the increase in interest payments is limiting the resources available for other priorities, as "it could translate into cuts in subsidies and employment, directly impacting ordinary Colombians."

One of the first sectors to feel the effects of this situation was the housing sector, where the "Mi Casa Ya" program, which offers subsidies for the purchase of low-income housing, was suspended at the end of 2024 due to a lack of resources. Although the government reactivated it in March of this year, some 40,500 households lost the interest rate coverage benefit, which entailed an increase in monthly payments of up to 30%.

Furthermore, it is estimated that some 49,000 families could give up on home purchases this year due to the reduction in subsidies, also hitting the construction sector, which has been experiencing a period of economic ups and downs for several months.

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“Education is another critical area. ICETEX reduced student loan openings by 40,000 compared to the previous year, due to a 33% drop in its budget, which fell from $1.2 trillion to $859.036 billion. The elimination of interest rate subsidies has made access to higher education more expensive, with an average 17% increase in the cost of loans for vulnerable students,” the Crowe Co. spokesperson noted.

In this context, he highlighted that the usury rate, which establishes the maximum legal interest rate for credit cards and open-ended loans, currently stands at 25.97%, making it even more difficult for many families to access credit.

The fiscal adjustment that never arrives

According to the Autonomous Committee for Fiscal Rules (CARF), to comply with legal guidelines, the country would need a fiscal adjustment of $46 trillion in 2025, equivalent to 2.6% of GDP. However, the report considers this scenario unviable given current restrictions.

“The government's attempt to pass a new tax reform in 2024 failed, and cuts totaling more than $12 trillion have not been enough to restore stability. Major rating agencies, such as Moody's, S&P, and Fitch, have changed the country's outlook from stable to negative, a warning sign that could lead to the loss of the investment grade it has held since 2011,” added Juan Carlos Arbeláez.

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Given this, he emphasizes that the solution requires a fundamental transformation, based on the understanding that "Colombia needs a structural tax reform that controls spending, broadens the tax base, eliminates unjustified exemptions, and combats evasion" in order to generate market confidence.

A strong impact

Beyond the macroeconomic figures, the report emphasizes that the fiscal deterioration has real impacts on Colombian households: more expensive services, less accessible subsidies, and more restrictive credit conditions. In the author's words: " The debate is no longer about whether the fiscal crisis exists, but rather how much longer we are willing to wait to correct it."

“Small and medium-sized businesses are also suffering the effects of this fiscal crisis. Since the 2022 tax reform, they face a higher tax burden, with increased taxes on dividends and a minimum rate of 15% on adjusted financial profit. Added to this is inflation, high interest rates, and higher advance payments and withholdings,” they emphasized.

Additionally, they explained that access to credit has been restricted and public investment has decreased significantly, based on analysis centers such as the Fiscal Observatory of the Javeriana University, which reports that the public investment budget fell by 33% in 2025 (from $105.8 billion to $70 billion), and entities such as the Comptroller General's Office, which also indicates a 17.4% cut, going from $100 billion to $82.5 billion. Arbeláez confirms that "the Government has absorbed more credit to cover its deficit, making resources more expensive for companies. In fact, the high intervention rate of the Bank of the Republic (9.25%) and delays in state payments are pushing many SMEs to the brink of insolvency."

Finally, they highlighted that these impacts are also being felt in the labor market, where informal employment exceeds 57%, reflecting the contraction of the formal market, or in matters of foreign direct investment (FDI), which fell 15.2% in 2024 compared to 2023, due to the distrust generated by changes in economic policy and the lack of clarity about the country's direction.