Colombia's Gross Debt Reaches All-Time High At 65% Of GDP

- Colombia's gross debt climbed to 65% of GDP in January 2026, up 0.7 percentage points from December's 64.3%, reaching an all-time high in nominal terms at COP$1.2 trillion ($269 billion)

- Borrowing costs are surging: domestic bond rates jumped 140 basis points in February, with short-term rates up 235 bps, as the yield curve flattens under fiscal pressure

- Treasury cash reserves fell to their lowest since 2024, while short-term financing remains at 19% of domestic borrowing - nearly double the 2021–2024 average of 10.2%

Colombia debt has reached a historic high, with the Autonomous Fiscal Rule Committee (CARF) reporting that gross public debt climbed to 65% of GDP in January 2026 - the highest level on record and 0.7 percentage points above the December close of 64.3%. The milestone comes as Colombia's independent fiscal watchdog warns that public finances are on an "increasingly concerning" trajectory, with government spending outpacing revenue, borrowing costs surging, and cash reserves falling to dangerous lows. The Rio Times, a Latin American financial news outlet, examines what the fiscal deterioration means for investors and the country's credit standing as it enters a pivotal election year.

In nominal terms, total government debt now stands at approximately COP$1.206 trillion ($269 billion), composed of COP$841 trillion ($188 billion) in domestic obligations and COP$365 trillion ($82 billion) in external debt. The external component grew 3% - or COP$10.7 trillion ($2.4 billion) - between December and January, driven primarily by the issuance of three new dollar-denominated global bond series maturing in 2029, 2031, and 2033. Domestic debt edged up 0.3%. The stock of short-term treasury bills (TCOs) declined 4.4%, but long-term government bonds (TES) rose 1.1%, adding COP$7.1 trillion ($1.6 billion).

Short-term financing now represents 19% of total domestic borrowing - down slightly from December's 19.6% but still nearly double the 10.2% average from 2021 to 2024. This elevated reliance on short-dated instruments exposes the government to refinancing risk and higher rollover costs, particularly as TES yields have risen sharply. In February alone, domestic bond rates climbed an average of 140 basis points, with the short end of the curve surging 235 basis points. The zero-coupon TES curve continued to flatten, signaling that markets are pricing in persistent fiscal stress rather than a temporary spike.

The CARF's March monitoring report offered some positive signals alongside the warnings. Tax collection in January reached COP$37.4 trillion ($8.4 billion), showing improvement, and investment execution has accelerated to 43.6% compared to 31.2% at the same point in 2025. But total fiscal spending through February hit 3.8% of GDP - 0.4 percentage points above the same period last year - while primary spending held at 2.9% of GDP. Both figures exceeded the 2021–2025 average by meaningful margins.

Perhaps most alarming, the treasury's available cash fell to its lowest level since 2024, dropping COP$3.3 trillion ($740 million) in February alone. The Colombia debt trajectory has become a central issue for credit rating agencies: Moody's published an assessment on March 13 warning that the deficit reduction to 5.1% of GDP projected for 2026 does not represent a structural adjustment, while the CARF estimates a COP$31.1 trillion ($7 billion) funding gap that, if unresolved, could push the deficit to 6.7% of GDP and debt toward 70% - approaching the limit set by the fiscal rule framework that was suspended in 2025 and is not due to be reinstated until 2028. Former Finance Minister José Manuel Restrepo described the situation bluntly, saying Colombia's public finances are "absolutely destroyed" after the primary deficit multiplied tenfold in two years. With the country's 10-year bond yield now among the highest in the OECD, the cost of inaction is compounding faster than the government's plans to contain it.

MENAFN17032026007421016031ID1110874481