On 15 February 2022 the IMF issued a report on the economy of Colombia following discussions under Article IV of the IMF’s articles of agreement.

Colombia’s economy is projected to grow by 4.5% in 2022, led by household consumption. Investments and exports are expected to support growth as commodity prices will be higher. There are still uncertainties die to the pandemic, and Colombia would be vulnerable to a sharp rise in global risk premia and other adverse consequences of heightened global uncertainty. There would also be downside risks from a slower implementation of the infrastructure agenda and there may be some political uncertainty as elections approach.

Colombia should consider further phasing out of the pandemic support measures; and improved targeting of remaining measures. Finding new sources of revenue will be important for financing social protection programs and public investment; and lowering the national debt more quickly.

Revenue gains are already resulting from the Social Investment Law and from the modernization of the Tax and Customs National Authority (DIAN). Colombia should also be looking to raise more tax revenues amounting to a further 1% to 1.5% of GDP in the medium term.

Revenue can be increased by reducing tax distortions and opportunities for avoidance, making the tax system more progressive and increasing fairness. Higher revenue can also be accompanied by more efficiency in government spending, better use of the social benefit system and improved identification of benefit recipients. Energy subsidy reforms should be further implemented.

Barriers that prevent firms and labour becoming part of the formal economy should be removed to help reduce structural unemployment and increase productivity.

Green investment is an important element in achieving a sustainable economic recovery and this will be helped by the recently approved Carbon Neutrality and Climate Resilience Law. There was a successful launch of sovereign green bonds in 2021 and with the introduction of new environmental taxes Colombia facilitate continued investment in important climate-related areas.