After weeks of debate and controversy, the government of President Gustavo Petro opted to declare an “economic emergency” in Colombia as a mechanism to address a 2026 budget deficit of approximately 16.3 trillion pesos (about US$4.2 billion), after Congress struck down the tax reform bill intended to finance the General Budget for next year.
This decision, officially announced by the president last Friday, marks a profound shift in the executive branch’s economic strategy, which had hoped to secure essential resources for next year through the financing law but, failing to obtain legislative approval, chose instead to resort to a constitutional state of exception.
Colombia enacts ‘economic emergency’ decree to address fiscal deficit
The announcement of the economic emergency came after Congress shelved the tax reform proposed by the Executive, which sought to restructure the tax system in order to increase fiscal revenue and thus close the projected spending gap for 2026—a commitment adopted by Congress when the budget for next year was approved but ultimately rejected by the Senate’s economic committee, which filed the proposal.
The parliamentary decision left the government without the legal instrument it considered necessary to balance public finances, forcing it to explore alternative mechanisms. In this context, the government argued that without new resources it would be impossible to meet debt obligations and maintain funding for essential programs and projects, which in its view could put the country’s financial stability at risk.
The declaration of an emergency authorizes the Executive to issue decrees with the force of law for a period that may initially last up to 30 days and be extended without exceeding 90 days in a year. During that time, the government may enact regulations aimed at mitigating the effects of the crisis and ensuring the financing of state functions, although not without limits: the decrees must have a direct and specific connection to the emergency and may not affect fundamental social rights without justification.
In addition, the Constitution requires that once the crisis has passed, the Executive provide detailed accounts to Congress regarding the causes that led to the emergency and the measures adopted. To decree it, the signatures of all ministers are required—something Interior Minister Armando Benedetti confirmed took place last Thursday.
With this controversial decision, the government seeks to raise the amount it had hoped to collect through the failed tax reform and to ensure state liquidity for 2026. “What we are waiting for is to guarantee the recovery of the resources that Congress left unfunded in the national budget, and there is an unfunded budget gap of 16.3 trillion pesos (approximately US$4.2 billion),” said Finance Minister Germán Ávila.
Legal requirements for the decree
These decrees must be directly linked to the crisis that prompted them, be proportional and temporary, and are subject to constitutionality reviews by the Corte Constitucional and, ultimately, to oversight by Congress, which may amend or repeal the measures adopted during the period of exception.
For the government, this tool is the last avenue to recover the resources lost after the Legislature’s rejection; for its critics, by contrast, it represents an attempt to bypass the state’s checks and balances.
After the signatures of all Cabinet ministers were secured, the decree formalizing the economic emergency was expected to be filed on Friday, December 18. Interior Minister Armando Benedetti confirmed these steps at a press conference, stressing that the measure seeks to preserve the country’s economic stability in light of the inability to rely on a financing law approved by Congress.
According to his explanation, the text does not contemplate imposing new taxes on vulnerable populations, but instead focuses on levies on those with greater resources, in an effort to counter criticism claiming that the initiative would affect the middle class. “Basically, this is done with a structure that imposes taxes on the mega-rich and not, as the opposition has said, on the middle class, as business leaders are claiming,” the minister said.
Benedetti also underscored that the declaration of emergency is indispensable to address public debt and avoid negative consequences in financial markets, such as an increase in international borrowing costs. He emphasized that without additional resources, not only would state finances be weakened, but strategic projects and infrastructure works could also be jeopardized, as they depend on solid fiscal planning for their execution.
Business leaders warn over the legality of the economic emergency in Colombia
Beyond criticism from the conservative opposition, business leaders and constitutional law experts have questioned the legality and appropriateness of the economic emergency. Some argue that using this mechanism to bypass the Legislature’s rejection of the tax reform is unconstitutional, since, in their view, the strict requirements established by the Constitution for a state of emergency of this nature are not met.
They are calling on the Corte Constitucional to urgently review the measure and endorse its conformity with the principles of separation of powers and legislative oversight, warning that an expansive interpretation of the emergency could set a dangerous precedent for institutional balance.
For their part, business leaders, meeting at the National Federation of Business Owners (FENALCO), led by Jaime Alberto Cabal, sent a letter to the president of the Constitutional Court, Justice Jorge Enrique Ibáñez, requesting to “maintain special, preventive, and timely attention” regarding the economic emergency decree that the national government expects to issue. This is intended to ensure that the appropriate constitutional review is guaranteed.
“Legislative decrees issued during states of emergency produce immediate legal effects, capable of consolidating situations whose subsequent reversal may prove complex, even in the event of a declaration of unconstitutionality,” Cabal states in his letter to the Constitutional Court.
According to the head of the business association, the decree would end up affecting legal certainty, confidence, and the country’s economic stability. He also said that the constitutional standard for declaring a state of emergency is currently not met, since Congress’s rejection is —in his view— not sufficient grounds to decree an economic emergency.
7⃣ FENALCO confía en que, de expedirse el decreto, la Corte Constitucional realizará un examen riguroso y, de ser necesario, declarará su inexequibilidad.
🔗 Conozca el comunicado completo acá.➡️ pic.twitter.com/r6tjK4T7TM
— Fenalco Nacional (@FenalcoNacional) December 20, 2025
Related: De La Espriella Calls on Court to Strike Down Government’s ‘Economic Emergency’.