Colombia’s Debt Interest Payments Are Set to Hit a Record High in 2027

Written on 04/20/2026
Josep Freixes
A study by Javeriana University reveals that interest payments on Colombia’s public debt will reach record levels in 2027. Credit: Carlos Santibanez, CC BY-NC-SA 2.0.

A study by the Fiscal Observatory of Universidad Javeriana warns of the increase in interest payments on Colombia’s debt, which in 2027 will reach record levels, compromising investment and reducing the government’s room for maneuver.

The entity explains that this increase, estimated at around 43 trillion pesos (approximately US$11.8 billion) within the budget, will push this item to record levels and turn it into one of the main pressures on public finances. The figure sums up the problem: a growing share of spending will be used to meet obligations to creditors.

The effect on the budget is immediate. More interest means less room for investment, social programs, and the functioning of the state. In a context of high rates and accumulated debt, the cost of debt begins to compete directly with other public spending priorities.

Meanwhile, the government and the opposition continue their standoff over who is responsible for this situation. For the government, the repeated rejection by the opposition majority in Congress of its tax reform proposals—aimed at making higher incomes pay more taxes—is behind Colombia’s suffocating fiscal deficit.

The opposition, for its part, points to President Gustavo Petro as spending more than the country brings in—something that has been happening in recent years—which generated the large deficit that will constrain the next government’s actions.

In addition, it is worth recalling the recent annulment by the courts of the economic emergency decree, the last resort the government sought to curb the accumulation of debt.

Colombia’s debt interest payments are set to hit a record high in 2027

Fiscal projections for 2027 show a sharp increase in interest payments, which will account for the bulk of debt servicing. The rise of nearly 43 trillion pesos (approximately US$11.8 billion) compared to previous levels marks a turning point in the recent trajectory of public spending.

The figures are clear: in 2025, government revenues accounted for 16.3% of GDP, while total spending reached 22.7% of GDP. This imbalance led to a deficit of -3.5% of GDP, forcing the government to finance itself with higher borrowing in a context of rising costs.

According to the study by the Fiscal Observatory of Universidad Javeriana, in real terms, the 2027 budget would increase by 19.1 trillion pesos (approximately US$5.2 billion). However, this growth does not reflect an expansion of public spending on programs or investment, but rather the increase in debt servicing.

In recent years, the financial cost had already been rising steadily, but it has now reached a scale that is altering the composition of the budget. Interest payments are no longer just another component and have instead taken on a central role in fiscal accounts.

Behind this dynamic is the rising cost of credit. Interest rates, both in the domestic and international markets, have remained at elevated levels, increasing the cost of issuing new debt and refinancing existing obligations.

The increase in interest payments is directly linked to the size of the debt. Colombia has raised its level of indebtedness in recent years to finance previous fiscal deficits and sustain spending, which amplifies the impact of interest rates on the budget.

Each additional percentage point in the cost of financing translates into billions of pesos in additional interest payments. This creates structural pressure on public finances that does not disappear in the short term and that shapes fiscal decisions going forward.

The result is a complex dynamic: the higher the debt, the higher the interest payments; and the higher the interest payments, the lower the capacity for adjustment without resorting to more borrowing or spending cuts.

The crowding out of public spending and the room for maneuver

The growth in interest payments has a direct effect on resource allocation. As this item increases, it crowds out other components of the budget, especially investment.

This implies that key sectors may fall behind. Money allocated to debt payments does not generate the same impact on growth or welfare as investment in infrastructure, education, or health. The quality of public spending is affected.

In addition, budget rigidity increases. With more resources committed to financial obligations, the room to reallocate funds or respond to new needs is significantly reduced.

The rise in interest payments limits the Government’s ability to implement economic policies. In an environment of moderate growth, the lack of fiscal space makes it difficult to adopt measures to stimulate the economy or address external shocks.

At the same time, the greater weight of debt may affect the country’s risk perception. If investors demand higher returns, the cost of financing will continue to rise, reinforcing the cycle of pressure on public finances.

This scenario forces complex decisions. Adjusting spending, increasing revenues, or redefining priorities are options that entail political and economic costs in an already demanding context.

By 2027, debt would account for 24.9% of the budget, compared to levels of 18%–20% in previous years. In contrast, investment would fall to 13.8%, from levels close to 18%–20%, reflecting a clear decline compared to past fiscal years.

The reality is that the amount projected for next year for interest payments is one of the highest items in the budget: it is only slightly lower than the Education sector (91.6 trillion pesos, approximately US$25.1 billion) and far exceeds spending on Health (81.3 trillion pesos, approximately US$22.3 billion), as well as that of all other sectors.