Gustavo Petro’s government has been ordered to return money collected during a recently declared economic emergency after the country’s Constitutional Court ruled the measure unconstitutional.
The court’s decision marks a significant setback for the Colombian administration, which has already been facing financial pressure due to failed tax reform efforts in Congress and growing budget challenges.
The emergency decree was introduced in January as part of a plan to raise around 11 trillion pesos (about $3.07 billion) to support the national budget. However, the court later ruled that the emergency declaration itself did not meet constitutional requirements.
As a result of the measures implemented during that period, the government collected approximately 1.67 trillion pesos (around $467 million), according to a source from the National Tax and Customs Directorate.
The court has now ordered that these funds must be returned, increasing financial uncertainty for the government at a time when it is struggling to manage its fiscal deficit.
The economic emergency mechanism allows governments to bypass Congress and make decisions through decrees in urgent situations. In this case, the Petro administration had introduced several tax measures, including taxes on high-value liquid assets, financial sector income, and certain goods such as alcohol, vehicles, motorcycles, and aircraft.
However, the court’s ruling said the emergency declaration did not justify such extraordinary powers. In previous similar cases, the court had not required governments to return collected funds, making this decision more impactful than earlier rulings.
The decision comes at a difficult time for Colombia’s economy. The country is facing a growing fiscal deficit, which has already forced the government to adjust its financial targets for 2025, increasing the deficit forecast to 7.1% of GDP.
Economists say the ruling could further limit the government’s ability to manage spending and fund public programs, especially as political support for new tax reforms remains weak in Congress.
German Avila recently announced plans to introduce a new tax reform bill worth around 16 trillion pesos to help finance the national budget. However, with limited time left in the legislative session, passing the proposal may be difficult.
The court’s ruling highlights ongoing tensions between the executive branch and judicial authorities over the use of emergency powers and fiscal management tools.
It also raises broader questions about how Colombia will balance economic stability with political constraints in the coming months.
For now, the government must comply with the court’s order and return the collected funds, while continuing efforts to stabilize public finances and secure approval for new revenue measures.
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