Colombia Submits 15% Spending Cut Bill to Congress as Fiscal Deficit Nears 9.4% of GDP

Colombia's government submitted a fiscal reform bill to Congress on Thursday that would cut public spending by about 15% and raise revenue through new taxes, aiming to avert further deterioration of the country's finances. The proposal, dubbed the "Rescue Law," is a high-stakes test for Latin America's fourth-largest economy as rising debt and interest costs threaten investment and complicate efforts to regain the investment-grade rating lost in 2021. Vice President Jose Manuel Restrepo said one of every three pesos collected in taxes now goes to interest on public debt, calling the bill a needed "rescue operation." The government projects a fiscal deficit of 9.4% of GDP under current 2027 budget assumptions, a level it called unsustainable. About 70% of the adjustment would come from spending restraint, with the rest from higher-income taxpayers. Measures include a wider value-added tax base, higher levies on tobacco, vaping products, alcohol and sugary drinks, personal income tax changes, a temporary financial-sector surcharge, anti-evasion steps and asset sales. The bill also offers lower rates for small and medium-sized businesses and incentives for large investment projects. It now faces a difficult debate in Congress.