Uncertainty Over New Budget Sends Dollar Up 80 Pesos in Colombia
The strong market reaction to the proposed 2027 General National Budget is already reflected in the price of the dollar. The U.S. currency rose by as much as 80 pesos during trading on Friday in Colombia, a move that highlights the concern among investors, banks, and financial market participants over the deterioration of the public finances laid bare by the first budget proposed by Abelardo De la Espriella’s government.
The bill presented by Finance Minister Miguel Gomez totals nearly 635 trillion pesos (approximately US$205 billion), about 10% more than the budget submitted by Gustavo Petro’s administration and 16% more than the budget in effect for 2026.
The government says the increase is due, among other factors, to expenses that were not adequately accounted for in the previous proposal. However, the message received by the market is particularly troubling: the new budget does not entail the spending cuts expected from the new government, but rather an increase that pushes the projected fiscal deficit for 2027 to 9.4% of GDP.
Uncertainty over new budget sends dollar up 80 pesos in Colombia
The dollar’s reaction has a straightforward explanation. During his campaign and in the first weeks of his administration, De la Espriella had presented an adjustment of the public finances as one of his priorities. His economic team had warned that the government was spending far more than it was taking in and that a significant reduction in public spending would be necessary.
Miguel Gomez himself had called for cuts of nearly 60 trillion pesos (approximately US$19.3 billion) before taking office and had warned about the high cost of Colombia’s borrowing. He had also defended the need to control spending in order to restore investor confidence.
That is why the budget unveiled this week creates a contradiction that is difficult to ignore. The government says it is coming clean about the finances it inherited and that the previous budget did not fully account for obligations such as pensions, health care, and other expenses. Vice President Jose Manuel Restrepo has specifically defended that explanation, saying the proposal represents a “truth budget.”
But for the markets, the problem does not disappear simply because previously unaccounted-for obligations are now being recognized. The deficit is increasing, as are financing needs. According to projections released alongside the proposal, public debt could reach around 66% of GDP.
El Presupuesto de la verdad, que radicamos hoy, no crea cargos. Es uno de “errores” del presupuesto Petro, que ni siquiera contó bien el número de funcionarios: reportaron 99.001 cargos cuando son 107.927. Imagínense el resto. Sinceramos las cuentas y hablamos con la verdad. pic.twitter.com/iNKju6dRSF
— Miguel Gomez M (@miguel_gomez_m) August 27, 2026
A tax reform could be the answer
The fiscal concerns are now opening another political front: how to obtain the resources the government needs without continuing to increase its debt.
In various sectors, the idea of a new tax reform to increase revenue is already gaining traction. The problem for the government is obvious. A tax reform just weeks after taking power could carry a high political cost, particularly for an administration that arrived at the presidential palace promising efficiency, spending cuts, and economic management different from Petro’s.
At the same time, maintaining the current fiscal imbalance could prove even more costly. The proposal includes a deficit that, according to the calculations released so far, reaches 9.4% of GDP, a figure that virtually doubles debt issuance needs compared with previous scenarios.
The reconstruction of areas affected by the earthquake is also adding pressure to public finances. The government has announced funding through the Milagro Fund to address the emergency, while the total reconstruction cost is estimated at several trillion pesos. But the earthquake alone does not explain the size of the fiscal imbalance reflected in the new figures.
The market wants answers
The rise in the dollar is therefore serving as a warning signal. It does not necessarily mean that markets have lost confidence in the government, but it does indicate that they are demanding more precise answers about how it plans to correct the deficit and finance its commitments.
The responsibility now falls particularly on Miguel Gómez. The finance minister will have to explain in greater detail why the government that promised to reduce spending is presenting a considerably larger budget and what specific measures it will take to close the gap between revenues and expenditures.
Banks and investors are looking for more than an explanation of the inheritance left by the previous administration. They want to know the government’s fiscal roadmap, the scope of potential spending cuts, additional sources of revenue, and, above all, how it plans to return the deficit to a sustainable path.
Until those answers arrive, the dollar is delivering its own verdict. And the jump of as much as 80 pesos recorded Friday shows that markets have interpreted the 2027 budget as a signal that the fiscal adjustment they expected from De la Espriella could take longer than anticipated.