Colombia’s congressional review panel has approved three loans of up to €497 million, about US$556 million, from Germany’s state development bank, KfW, to help fund the 2026 budget. The money can go anywhere in that budget. Meanwhile, the government’s monthly spending already exceeds its revenue by about US$3.4 billion.
The Interparliamentary Public Credit Commission, the congressional panel that reviews foreign borrowing, approved the loans, the Finance Ministry said Wednesday, 7 October. CONPES, Colombia’s top economic and social policy council, had also approved them. A ministerial resolution must still authorize the contracts, and the government doesn’t expect the money to arrive until the end of 2026.
A loan against a monthly shortfall
The government spends about COP 40 trillion, or US$12.3 billion, a month and collects about COP 29 trillion, or US$9.0 billion, according to figures the ministry provided Monday, 28 September. That leaves a gap of about US$3.4 billion each month. The KfW loans would cover roughly five days of it.
The Autonomous Fiscal Rule Committee, Colombia’s independent budget watchdog, expects the 2026 deficit to reach 7.8% of GDP, La República reported. The ministry projects a deficit of 7.2% for this year and 9.4% for 2027, the newspaper said. Those figures place the borrowing within a wider public-budget squeeze, not beyond it.
The ministry described the loans as German support for reforms on social inclusion and climate change. They’re untied, so the government can direct the money anywhere in the 2026 budget. The public has the stated reform goals, but the ministry hasn’t disclosed the loans’ interest rates, maturities, grace periods or how the total is divided among the three contracts.
Cheaper credit, hidden terms
The Finance Ministry said KfW will charge roughly two percentage points less than markets demand on Colombia’s euro-denominated bonds. It said the loans’ rate, term and grace period compare well with other options and will save money on debt service. The specific terms remain undisclosed.
Colombia’s 10-year peso bonds yielded 13.13% on Tuesday, 6 October, up from 11.98% on 6 August, La República reported, citing market data. The paper said that was Latin America’s highest yield, above Brazil’s 12.77%. The U.S. 10-year Treasury yielded 5.28% on Wednesday, according to the U.S. Treasury.
On 28 September, the government asked the International Monetary Fund to begin an Article IV consultation, its regular review of a member’s economy. A Finance Ministry team has been in Washington since Monday, 5 October, for talks scheduled through Friday, 9 October. Technical Vice Minister Juan Sebastián Betancur and macroeconomic policy director Sammy Libos lead the team, El Tiempo reported. The talks may mark a first step toward IMF support programs and financing instruments, but no request for an IMF loan has been announced. It isn’t known whether the discussions will lead to a credit line or program.
Officials promise a fiscal rescue
Finance Minister Miguel Gómez Martínez said the government had inherited a very serious fiscal situation from the previous administration, the leftist government of Gustavo Petro, who left office in August. Conservative President Abelardo de la Espriella plans a fiscal rescue law that had not yet reached Congress, La República reported.
“This authorisation reflects the national government’s commitment to managing the necessary resources,” Gómez Martínez said, linking the loans to the budget approved by Congress. The approval clears a path to signing, not immediate relief. Disbursement remains expected at the end of 2026. Fedesarrollo, a Bogotá think tank, said a credible fiscal plan could cut interest rates by 250 to 300 basis points, Portafolio reported. The Banco de la República was due to set interest rates on Friday, 30 October.