The Executive Board of the International Monetary Fund (IMF) has completed its 2025 Article IV consultation with Colombia, reviewing the country's economic performance and policy outlook as it approaches a pre-election year. The Colombian authorities have agreed to publish the IMF Staff Report related to this review.
Colombia's economy shows signs of improvement, with growth strengthening and inflation gradually declining due to tight monetary policy. International reserves remain at adequate levels and continue to increase. However, challenges persist as the fiscal deficit widens and public debt rises, leading to higher sovereign spreads. Private investment remains subdued amid ongoing uncertainty over government policies. In June, the Colombian government invoked an escape clause to suspend its fiscal rule until 2027.
According to IMF projections, real GDP growth is expected to reach about 2.5 percent in 2025 but will likely moderate in subsequent years as fiscal adjustments take effect before stabilizing at potential levels. The IMF expects inflation to decrease gradually, reaching approximately 4.5 percent by end-2025 and hitting the central bank’s target of 3 percent by early 2027 if current monetary and fiscal policies are maintained. The current account deficit is projected to widen slightly in 2025, while international reserves are set to reach 131 percent of the ARA metric by mid-year.
The IMF warns that significant downside risks remain for Colombia’s outlook. External factors such as tighter global financial conditions, increased trade barriers, stricter immigration policies, and geopolitical tensions could negatively impact growth through reduced exports, foreign direct investment (FDI), remittances, and higher borrowing costs. Domestically, delays in fiscal consolidation may undermine investor confidence and trigger sudden capital outflows; political uncertainties or rising crime could also affect economic activity.
In their assessment, Executive Directors "welcomed the strengthening of the Colombian economy and were encouraged by the progress in reducing inflation and poverty." They recognized Colombia’s resilience built on prudent macroeconomic management but noted concerns about weakened fiscal positions given ongoing domestic uncertainties and external risks.
Directors highlighted that repeated fiscal slippages and suspension of the fiscal rule have led to a deterioration in Colombia’s policy framework since its last request for access under the Flexible Credit Line (FCL). They stated: "the fiscal policy and policy framework have weakened considerably from a previously 'very strong' assessment that is required for continued qualification for the FCL." Directors urged authorities "to step up their efforts to meet near-term deficit targets" while supporting plans "to return to the fiscal rule by 2028." They emphasized that credible implementation of consolidation measures would help restore market confidence: "they recommended pursuing a balanced mix of growth-friendly expenditure and revenue measures, addressing budget rigidities, and adopting robust contingency planning."
The central bank was commended for maintaining tight monetary policy that has helped reduce inflation pressures. Directors stressed: "maintaining a tight monetary policy stance remains important... normalization should proceed cautiously." They also welcomed strengthened international reserves while recommending limited foreign exchange intervention only during disorderly market conditions.
Regarding financial stability, Directors found Colombia’s sector broadly resilient but called for close monitoring due to elevated real interest rates and increasing links between banks and nonbank institutions. Continued implementation of recommendations from Colombia's Financial Sector Assessment Program (FSAP) was encouraged alongside sound governance for new public pension savings funds.
To support long-term growth prospects, Directors advised reforms aimed at raising productivity, increasing labor force participation rates, diversifying economic activities—including careful execution of energy transition plans—and improving governance standards: "Directors also encouraged authorities to further strengthen governance and transparency... enhance investment climate."
The IMF explained that Article IV consultations involve annual discussions between staff teams and member countries’ officials regarding economic developments; reports are published with country consent on www.imf.org/Colombia.