Colombia leader plans to pass budget by decree

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Colombia’s president Gustavo Petro plans to issue the national budget by decree after lawmakers refused his proposed spending increases, his finance minister said — a move unprecedented since the current constitution was enacted more than three decades ago.

His government, the first from the left in Colombia’s modern history, had sought a 523tn peso ($126bn) budget for 2025, but a congressional committee rejected that last month and demanded lower spending. Some lawmakers accused Petro of seeking to bolster support with giveaways ahead of 2026 elections.

Petro and finance minister Ricardo Bonilla said in response that they would push the package through by decree, a manoeuvre permitted by Colombia’s constitution but not used since it was adopted in 1991.

“The rule is clear that if congress is unable to make a decision — and there was no debate — then the government can pass it by decree,” Bonilla told the Financial Times.

“The norm states that the budget is a government initiative and therefore it is the government that has all the power to make decisions,” he said. “But there is nothing extraordinary about that, nor is it true when people say that this is some kind of fiscal dictatorship.”

The government has until October 20 to secure next year’s budget through congress, which Bonilla said was impossible. Instead, the government will issue a budget decree between October 21 and December 30.

Any decree would probably be challenged in the constitutional court, Bonilla admitted. “There’s every possibility that [the decree] will be challenged and the court will have to decide, but the court has ruled [in favour of] decree power in the past and I don’t think it will change its opinion,” he said.

Petro, who in his youth belonged to an urban guerrilla group, took office in 2022 promising to overhaul the country’s orthodox economic model, which has been underpinned by public-private partnerships.

His pension reform was passed in June, but he has been widely frustrated by lawmakers rejecting proposals to expand the state’s role in the health system and tighten labour laws.

Petro has often painted policy setbacks as a “soft coup” by shady elites and opposition politicians, and has floated the possibility of drafting a new constitution.

His critics argue his threats over the budget indicate a desire to resist the country’s system of checks and balances. Mauricio Cárdenas, finance minister from 2012 to 2018, said Petro was emulating Mexico’s former president Andrés Manuel López Obrador, who used budgeted cash transfers to consolidate support.

“The government understands that one of the strategies that can be used to increase its support is by providing more cash transfers,” Cárdenas said, adding that Petro’s inability to work with congress represented a “failure”. “It shows weakness and that Petro is not willing to compromise.”

Bonilla said that while “every budget has political components”, opposition claims that the government wanted to influence the 2026 election “are without any sense”.

Petro has also bristled against the central bank, last week making an unusual call on its board to issue money to victims of Colombia’s decades-long, ongoing civil war.

Petro’s approval ratings have hovered around 35 per cent for months.

The budget dispute comes as Colombia’s economy struggles to regain momentum. Growth is forecast at a sluggish 1.7 per cent this year, and while inflation fell to an annual 6.1 per cent in August, it remains well above the government’s year-end target of 3 per cent. 

The peso has lost 9.76 per cent of its value against the dollar since June, while the central bank’s easing cycle is likely to keep pressure on the currency. 

The country’s fiscal deficit is expected to reach 5.6 per cent of GDP at the end of this year, while the government in June announced a 20tn pesos ($4.7bn) spending cut to comply with the fiscal rule, a policy overseen by an independent committee that is designed to prevent public finances from deteriorating.

The government has said it will push a tax reform through congress to raise $2.89bn for its proposed 2025 budget increase, in part by raising taxes on betting. If the budget were to be decreed but thrown out by the constitutional court, that would leave the government with a smaller 503tn pesos ($118.8bn) budget approved.

Political risk is hurting investor confidence, said Andrés Pardo, head of Latin America strategy at XP Investments.

“On one hand the budget issue sends negative signals to the markets over this inconsistent, erratic and unrealistic management of public finances,” Pardo said. “And on the other hand, the government is perpetuating a populist narrative of discrediting institutions.”

Bonilla blamed congress for the budget impasse. “This time, the problem is that congress did not want to negotiate,” he said.