WASHINGTON, USA – A staff team has been actively engaging with the Colombian authorities in the context of the ongoing 2025 Article IV consultation, with visits to Bogotá in mid-February and early-April.
Oner and Ding issued today the following statement:
The Colombian economy continues to expand with some moderation in key imbalances. After slowing sharply in 2023, the economy expanded by 1.7 percent in 2024 supported by private consumption, reflecting a robust labor market and a gradual recovery in investment.
Headline inflation resumed its downward trend in March, reaching 5.1 percent (y/y), underpinned by appropriately tight monetary policy. Meanwhile, the current account deficit narrowed further to 1.8 percent of GDP in 2024, supported by strong tourism and remittances inflows. This was financed with net foreign direct investment inflows, despite net portfolio outflows. International reserves remain adequate, rising to 130 percent of ARA by end-March, supported by the authorities’ reserve accumulation program last year. The banking system remains sound—liquid, adequately capitalized and provisioned—and subject to strong oversight.
However, public deficits and public debt have risen more than expected. The central government overall fiscal deficit rose to 6.7 percent of GDP in 2024, up from 4.2 percent of GDP in 2023 and 1.1 percentage points of GDP above the authorities’ deficit target in the medium-term fiscal framework. The higher deficit reflected lower-than-projected tax revenues as well as higher than targeted primary expenditures, despite spending adjustments in late-2024.
Liquidity constraints contributed to an accumulation of large budgetary backlogs (2.8 percent of GDP) that are in the process of being cleared this year, competing with 2025 budgetary resources. The higher deficits, coupled with a somewhat weaker peso, resulted in gross public debt reaching 61.3 percent at end-2024. As a result, Colombian spreads have risen, especially relative to peers, also impacted by tighter global financial conditions.
Against the backdrop of elevated and shifting global risks, the Article IV consultation continues on the outlook and on policies to mitigate shocks, while decisively strengthening public finances.
- Staff continues to engage with the authorities on the implications of rising global trade tensions on the Colombian economic outlook (given knock-on effects including through the commodity price channel as well as the financial and trade channels) and in better understanding the authorities’ policy response to this new environment.
- Importantly, engagement continues as the authorities work on plans to reduce the fiscal deficit this year and going forward. While the 2025 Financing Plan published in February envisages an improvement in the central government deficit to 5.1 percent of GDP, the authorities are working on the policies underpinning the projected revenue gains as well as the necessary expenditure adjustments to meet the overall fiscal deficit target and bolster resilience in the more shock-prone context.
The Article IV consultation will continue in the period ahead. We thank the authorities for the open and constructive dialogue, and we look forward to maintaining our close engagement, including in the margins of the IMF-World Bank Spring Meetings in late-April in Washington, DC.