Gustavo Petro declares economic, social emergency in Colombia

by · UPI

Dec. 24 (UPI) -- Colombian President Gustavo Petro's government declared a state of economic and social emergency, arguing that the country faces a grave and urgent situation that is undermining the state's ability to meet its obligations.

The decision followed Congress' rejection of a financing bill that sought to raise about $4.2 billion to fund the 2026 national budget and was formalized through a decree issued Monday.

Under the emergency declaration, the government is authorized to issue legislative decrees with the force of law to address the fiscal situation, reorganize the budget and adopt urgent measures that would normally require congressional approval.

The government also cited a deterioration in public order as one of the factors that increase pressure on state spending.

Related

According to the decree, recent security incidents have required stronger measures to guarantee public safety and expanded protection schemes amid rising risks of attacks against social leaders, human rights defenders and candidates ahead of upcoming elections, increasing the use of public resources.

The executive branch also pointed to emergency situations in several regions. Natural disasters linked to the current rainy season have raised demands for state assistance, further straining public finances.

Petro argued that the country is facing a fiscal crisis that cannot be addressed through ordinary state mechanisms and warned that, without additional revenue, cuts to social spending and public services would be unavoidable.

Responding to criticism of the emergency decree, the president said the measure is aimed at addressing debt left by the fiscal policies of former President Iván Duque, compounded by interest rate hikes by Colombia's central bank, Radio Caracol reported.

Petro said new resources should come only from "the mega-rich who have benefited from economic policy," framing the move as a limited return of those gains to society.

Colombia's economy has performed better than expected, with growth exceeding analysts' forecasts. Economists estimate gross domestic product will expand between 2.6% and 2.7% by year's end.

That rebound, however, comes amid mounting fiscal pressures. Public spending has risen largely on the back of increased government borrowing, without a corresponding rise in tax revenue.

Between 2023 and 2024, the fiscal deficit, the gap between government revenue and spending, widened by 2.5 percentage points. Analysts expect the deficit could exceed 7% of GDP in 2025, a level considered high by Colombia's fiscal standards.

To close that gap, Petro promoted reform aimed at raising about $4 billion in additional revenue for the 2026 national budget through new taxes. Congress shelved the bill earlier this month, prompting the government to warn that without that money, the country would face cuts to public investment and state-funded programs.

The president also warned that if the Constitutional Court overturns the emergency decree, the country risk premium would rise and debt sustainability concerns could trigger a severe economic crisis.

"The emergency decree on tax matters will be based on the same criteria that Congress' economic committees rejected," Petro said.