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Introduction

Colombia will hold presidential elections on May 31, 2026, with a possible runoff on June 21 if no candidate wins an outright majority. There are three leading candidates for the presidency: Iván Cepeda, from the same left party as current president Gustavo Petro; Abelardo de la Espriella, a far-right lawyer and businessman who has never held public office; and Paloma Valencia, a right-wing senator backed by former president Álvaro Uribe. 

In 2022, Colombians elected Petro, who took office in August of that year as the first left president in the country’s modern history. The election took place in the context of the recovery from the COVID pandemic, which took a particularly strong toll on Colombia. The pandemic pushed millions of Colombians into extreme poverty. In 2020, despite having the same per capita income as Brazil, a country with four times the population, Colombia had many more people living in extreme poverty. 

While much of the campaign has focused on the candidates’ differing strategies toward ending the country’s long-running armed conflict, polls have consistently shown that the economy, unemployment, and basic needs remain among voters’ top concerns. Petro has recently seen his approval ratings rise to their highest point in years, a change largely credited to the government’s expanded social programs and minimum wage increases.

This brief will look at the outcomes and policy choices under the Petro administration within the context of the upcoming elections. The 2022 election marked a notable shift in Colombia’s economic trajectory. The Petro administration has increased social spending by more than 1 percentage point of gross domestic product (GDP), raised the minimum wage by an average of nearly 9 percent per year in real terms, formalized and redistributed more land than any other recent government, and attempted to raise revenues through progressive taxation policies. In turn, the country has seen a historic drop in poverty rates while household consumption has buoyed economic growth. Nevertheless, an overly tight monetary policy (decided by a central bank that is independent of the government) and deteriorating external conditions have weighed heavily on the country.

The Petro Administration’s Policy Agenda and Implementation

The Petro administration took office pledging to address the country’s structural poverty and inequality through progressive tax reform and expanded social programs. One of the first major achievements was a tax reform passed in 2022. The reform increased revenues by raising taxes on high-income individuals and dividends, reducing preferential treatment for oil and mining companies, and shifting more of the burden toward taxpayers and sectors with greater capacity to pay. Later efforts to raise additional revenues — including new financing proposals and emergency measures — faced much greater resistance, as is discussed in more detail throughout the brief, but the initial tax reform remained one of the clearest early victories of the administration.

The government also sharply increased the minimum wage, treating higher labor income not only as worker protection but as a means of strengthening purchasing power and domestic demand. This was complemented by the 2025 labor reform, approved after a difficult legislative process and in a more limited form than originally proposed. The final law restored some worker protections — including limits on the use of short-term contracts; higher pay for night, Sunday, and holiday work; and protections for platform workers and apprentices — while leaving out more ambitious proposals on collective bargaining, care-related rights, and a rural labor contract designed to formalize seasonal agricultural work.

Further, the government reorganized Colombia’s cash transfer system around Renta Ciudadana, shifting from a more fragmented structure toward a framework focused on extreme poverty and vulnerable households. The redesign prioritized households with children, female-headed households, people with disabilities, and historically excluded populations. It was complemented by expanded support for older adults through Colombia Mayor, including a higher transfer amount and a broader coverage goal as well as continued support for low-income youth through Renta Joven. 

The Petro administration also championed pension reform, which sought to replace Colombia’s fragmented public-private pension system with a pillar-based model in which Colpensiones — the public pension fund — and private funds would play complementary roles rather than compete with each other. In practice, this would expand the role of the public system while leaving private funds as a complement for higher-income workers. Although the Congress of Colombia approved the reform in 2024, its implementation has been delayed by a constitutional review over procedural issues. 

Health reform was another central part of the administration’s social agenda, though it ultimately failed in Congress. The proposal aimed to reduce the role of private insurers in managing public health resources, strengthen public hospitals, and shift the system toward a more preventive and territorial model of care. The government argued that the existing system generated significant inequalities in access, particularly in rural and peripheral areas, and channeled large amounts of public funding through private intermediaries.

The rural agenda was one of the clearest expressions of the administration’s effort to address structural inequality. Centered on agrarian reform and linked to the 2016 Peace Agreement, it combined land purchases, formalization, restitution, and delivery to campesinos, Indigenous, and Afro-Colombian communities and conflict victims. Beyond redistribution, the strategy aimed to expand access to productive assets, improve tenure security, support food sovereignty, and strengthen the state presence in historically marginalized rural areas. It was also connected to a broader effort to support rural production through credit, public purchases, crop substitution in coca-growing regions, and a more active state role in agricultural commercialization. By 2025, the government had formalized, acquired, or redistributed more than 2.5 million hectares of land, marking a significant acceleration relative to previous administrations. The government also advanced the creation of an agrarian jurisdiction to resolve land conflicts more quickly and provide legal certainty. While a statutory framework was approved, its implementation remains limited because the law defining its operations has stalled in Congress.

The administration also attempted to link the popular economy to a broader strategy of productive transformation. Through the Pacto por el Crédito, it sought to redirect finance toward agriculture, manufacturing, housing, tourism, the popular economy, and other priority sectors, with banks committing major lending volumes to these areas. While this did not overcome deeper financial exclusion, especially in rural areas, it marked an effort to steer credit toward productive and underserved sectors. Programs such as ZASCA complemented this agenda by providing technical assistance, training, machinery, financial connection, and market access to small producers, microenterprises, informal workers, and community-based productive units. Together with the National Reindustrialization Policy and the energy transition agenda, these efforts aimed to diversify production, strengthen regional economies, and reduce dependence on extractive rents.

This territorial approach also extended to fiscal decentralization. The government backed a major reform of the Sistema General de Participaciones (SGP), the mechanism through which the central government transfers resources to municipalities and departments. Approved in 2024, the reform gradually increases the share of national current revenues transferred to local governments from roughly 25 percent to 39.5 percent over a 12-year period, representing the largest advance in fiscal decentralization since the 1991 Constitution. The reform aims to expand local capacity to finance health, education, water, sanitation, and other essential services. According to monitoring reports on the National Development Plan, per capita public investment in 2024 had a greater impact in economically lagging departments, consistent with the government’s stated objective of reducing regional disparities. Departmental investment increased in real terms by 4 percent between 2023 and 2024, with some of the largest increases occurring in historically marginalized territories such as Vaupés (43 percent), Arauca (27 percent), Chocó (26 percent), and La Guajira (24 percent).

The remaining sections of the brief will look at results across a number of social and economic indicators.

Poverty

One of the clearest features of Colombia’s recent economic performance has been the improvement in social indicators. As shown in Figure 1, monetary poverty declined markedly after 2022, when it had already returned to its pre-pandemic level. Poverty in Colombia had been stagnant for six years before spiking during the pandemic; however, since 2022, monetary poverty has decreased by 13 percent while extreme monetary poverty has declined by about 15 percent, equivalent to roughly 2.2 million people exiting poverty and to about 1 million leaving extreme poverty.¹

A similar pattern is visible in multidimensional poverty, which captures deprivation across dimensions such as education, health, housing conditions, access to services, and employment, offering a broader measure of well-being beyond income alone. It decreased by roughly 23 percent between 2022 and 2025, reaching the single digits for the first time in the available statistical series. In head-count terms, the number of people living in multidimensional poverty declined from 6.6 million in 2022 to 5.2 million in 2025. This means that about 1.38 million people exited multidimensional poverty over three years, including 793,000 people in 2025 alone. 

The decline was particularly notable in rural Colombia, where multidimensional poverty fell from 27.3 percent in 2022 to 22.4 percent in 2025. Some of the underlying indicators also improved more favorably than in the comparable pre-pandemic period. The clearest example is access to water: the share of rural households without an improved water source fell from 37.3 percent to 30.7 percent between 2022 and 2025, after rising from 36.5 percent to 41.2 percent between 2016 and 2019. Housing quality, health insurance coverage, and long-term unemployment also improved in these areas after 2022, following earlier stagnation or deterioration. Although rural poverty remains substantially higher than in urban areas, the scale of the recent reduction suggests meaningful progress in historically underserved areas.

Figure 1
Source: National Administrative Department of Statistics (DANE), Monetary Poverty

Income and Employment

The substantial drop in poverty was likely helped by a sharp increase in labor income at the bottom of the income distribution. As shown in Figure 2, the recent rise in the minimum wage represents a clear break with the previous decade. Between 2012 and 2022, the real minimum wage increased by about 9 percent, or 0.9 percent per year. By contrast, between 2022 and 2026, the real minimum wage rose by roughly 39 percent — almost 9 percent per year. 

Figure 2

Source: Authors’ calculations based on Banco de la República historical series and DANE Consumer Price Index (CPI).

These wage gains were not accompanied by a visible weakening of the labor market. On the contrary, unemployment declined significantly; at 8.8 percent in March 2026, it reached its lowest March levels since 2001 in the available series, down from 12.1 percent in March 2022 and from 11.2 percent in March 2019. This decline was not driven by unemployed workers leaving the labor force: The labor force participation rate stood at 65 percent in March 2026, compared with 63.5 percent in March 2022 and 64.9 percent in March 2019. Informality also declined, with the national informal employment rate falling to 55.6 percent in March 2026, from 59.1 percent in March 2022. 

These trends are consistent with a body of economic research showing that substantial minimum wage increases do not necessarily reduce employment or increase informality. In Colombia’s case, higher earnings among low-wage workers may also have strengthened demand for goods and services supplied by small firms, self-employed workers, and informal businesses — particularly in sectors such as retail, transport, food, and local services. This may help explain why rapid real wage growth coincided with falling unemployment and informality rather than labor market deterioration. 

The combination of rising labor income, falling unemployment, and lower informality was also reflected in broader changes in Colombia’s social structure. The share of the population classified as middle class rose from 29.9 percent in 2022 to 34.4 percent in 2024. At the same time, the share living in poverty fell from 36.6 percent to 31.8 percent. Household survey data reinforce this interpretation. Between 2023 and 2024, real per capita income growth was strongest in the middle of the distribution: The middle 60 percent (quintiles 2–4) grew by an average of 5.5 percent, compared with 2.9 percent in the bottom quintile and 3.5 percent in the top quintile.

Social Spending

The recent decline in poverty likely reflects more than labor-market improvements alone. As inflation eased from its earlier peak, household purchasing power began to recover, particularly for lower-income households that spend a larger share of income on essentials (see Figure 6 for inflation trends).

Beginning in 2023 and more fully implemented in 2024, the government reorganized Colombia’s social transfer system — covering both cash and in-kind support — under a new framework led by Prosperidad Social. The main change was the creation of Renta Ciudadana as the central program for poor and vulnerable households. This program absorbed and redesigned the household-transfer function previously associated with Familias en Acción but with broader eligibility and larger benefits. 

Under Familias en Acción, support was mainly directed to poor households with children and was tied to school attendance and health requirements. Under Renta Ciudadana, the government shifted toward a more differentiated model, prioritizing households in extreme poverty, especially those with children, female-headed households, households that include persons with disabilities, and historically excluded communities, including Indigenous and Afro-Colombian populations. Transfers rose from about 160,000 pesos every two months under Familias en Acción to up to 500,000 pesos under Renta Ciudadana, with more frequent payments (around every 45 days).

In 2024, noncontributory support for older adults was also expanded significantly through Colombia Mayor, a long-standing program that was scaled up under the current administration. Coverage increased from about 1.7 million beneficiaries to roughly 2.8 million by early 2026, with a target of reaching around 3 million. At the same time, monthly transfers increased sharply, rising from around 80,000 pesos to approximately 230,000 pesos, even as broader pension reform remained under review by the Constitutional Court.

As shown in Figure 3, public social spending as a percent of GDP increased during the pandemic to nearly 17 percent, driven largely by the collapse in GDP. However, after falling back below its pre-pandemic level in 2022, social spending increased significantly in 2023 and 2024 by 1.2 percentage points of GDP — led by old-age spending and health, with additional resources directed to areas such as housing and labor-market programs.

Figure 3

Source: Authors’ calculations based on DANE public social expenditure data (SOCX classification, current prices) and DANE annual national accounts (GDP, current prices).

Some policy efforts also targeted deeper structural sources of inequality, especially in rural Colombia, where land concentration has long been among the highest in the world. According to the National Land Agency, between August 2022 and December 2025, the government formalized nearly two million hectares for campesino and ethnic communities, compared with roughly 1.07 million under the Iván Duque administration and 265,000 under the Juan Manuel Santos administration. Over the same period, more than 286,000 hectares were delivered — far above the totals recorded under the two previous administrations. While these reforms are gradual by nature, broader land access and greater tenure security may begin to reduce persistent rural poverty and inequality over the longer term.

The land agenda and expanded transfer programs were part of a broader effort to address inequality where it has long been most entrenched: in rural and peripheral Colombia. A similar shift was visible in the geographic allocation of public investment. The share of national-budget investment directed straight to municipalities increased from 6 percent before Petro to 41 percent under his administration, while the number of municipalities receiving direct targeted investment rose from 210 under Duque to 1,036 under Petro — nearly all of Colombia’s 1,103 municipalities. This represented a significant break with the traditional concentration of resources in major urban centers and better-connected regions, with greater emphasis on poorer and historically neglected territories.

Growth and Investment

Colombia’s recent growth performance is best understood as a normalization after the exceptional volatility of the pandemic years. Real GDP growth reached 10.8 percent in 2021 and 7.3 percent in 2022 as the economy rebounded from the 2020 contraction triggered, as in much of the world, by COVID containment measures. As that rebound faded and macroeconomic conditions tightened, growth slowed sharply to 0.7 percent in 2023. Since then, activity has gradually regained momentum, with growth rising to 1.7 percent in 2024 and 2.6 percent in 2025. GDP per capita increased by 2.0 percent in 2025, the strongest per capita growth rate in the last decade (other than the pandemic rebound years), and the IMF projects a 1.7 percent increase in per capita GDP for 2026. 

The composition of growth is particularly important. As shown in Figure 4, household consumption has been the most consistent driver of GDP growth in recent years. Even during the slowdown, private consumption continued to make a positive contribution: 0.4 percentage points in 2023, 1.3 points in 2024, and 2.8 points in 2025. Large real minimum wage increases, combined with falling inflation and lower unemployment, boosted households’ purchasing power and helped sustain demand despite weak investment. Remittance inflows and expanded transfers also likely supported household consumption, particularly among lower-income households. 

Figure 4

Source: Authors’ calculations based on DANE quarterly GDP data.

By contrast, investment has been the weakest component of demand. After contributing strongly during the rebound in 2021–2022, gross capital formation became a major drag on growth in 2023, subtracting 3.3 percentage points from GDP growth. This reflected a prolonged contraction in gross fixed capital formation, which was negative in every quarter of 2023 and remained weak through most of 2024. Investment made only a modest positive contribution in 2024 and 2025. This helps explain why overall growth has remained relatively low despite stronger household demand.

Figure 5 shows that this weakness has been driven primarily by the private sector rather than by a collapse in public investment. Total gross fixed capital formation fell from 19.1 percent of GDP in 2022 to 16 percent in 2025. Over the same period, private investment declined from 16.4 percent to 13.4 percent of GDP, while public investment remained comparatively stable at around 2.6 percent of GDP. In other words, the recent investment shortfall appears concentrated in weaker private capital formation, consistent with the restrictive monetary conditions discussed below.

Figure 5

Source: Authors’ calculations based on DANE quarterly institutional accounts and quarterly GDP data.

Taken together, these patterns suggest that Colombia’s recent economic performance has been sustained by household resilience, while weak investment has remained the principal constraint on faster growth. This distinction is central for evaluating current policy debates: The main challenge has not been an absence of consumer demand but the difficulty of reviving productive investment under a restrictive monetary policy. 

Monetary Policy

A central constraint on Colombia’s recent economic performance has been monetary policy. While the executive sets fiscal priorities, interest rate decisions are made independently by the Banco de la República. In principle, this institutional arrangement is intended to protect price stability. In practice, however, monetary policy also shapes growth, investment, employment, and public financing conditions, making its distributive and macroeconomic consequences highly significant.

As shown in Figure 6, the Banco de la República raised rates sharply after inflation surged in 2022–2023 and kept them elevated even as inflation began to decline. In March 2026, the board raised the policy rate again, keeping it in double-digit territory even though annual inflation had already fallen to around 5 percent. This left Colombia with one of the highest policy rates in the region — well above countries such as Chile, Peru, Mexico, and Costa Rica and below only Brazil among the region’s larger economies, where interest rates have historically been among the highest in the world.

Figure 6

Source: Banco de la República monetary policy rate series and DANE Consumer Price Index (annual variation).

High interest rates affect the economy through several channels. For households, they increase the cost of mortgages, consumer credit, and other borrowing. For firms, they raise financing costs, reduce expected returns on new projects, and can discourage hiring and capital formation. These effects are especially relevant in Colombia’s recent context, where household consumption has shown resilience while investment has remained comparatively weak. To that extent, restrictive monetary policy appears to have weighed disproportionately on the recovery through its effects on private investment.

In emerging economies, high interest rates are often defended as necessary to stabilize the exchange rate and reduce depreciation pressures. Those concerns are real: Shifts in global financial conditions, including higher US interest rates and changes in investor sentiment, can narrow domestic policy space. Yet that rationale appears less compelling in Colombia’s recent context, where the peso remained relatively strong through much of 2024–2026 and ranked among the region’s top-performing currencies in 2025, second only to Paraguay. In such circumstances, very elevated rates involve important trade-offs. They may help contain inflation by strengthening the currency and lowering the cost of imported goods, but they can also weaken export competitiveness, reduce the domestic-currency value of foreign-currency earnings, and suppress domestic demand.

When inflation is driven largely by supply disruptions, imported costs, or administered-price adjustments, tighter monetary policy cannot directly resolve the original source of price pressures. Their main domestic effect is to compress demand by making credit more expensive. Recent IMF analysis has made a similar point in the case of temporary energy shocks: No national central bank can lower global commodity prices through higher interest rates. The IMF has also emphasized that recent supply shocks have simultaneously raised inflation and slowed growth, complicating the trade-off between price stabilization and economic activity.

Fiscal Policy and Debt

Colombia’s fiscal position in recent years has been shaped by elevated debt-service obligations inherited from the previous administration, rigid spending commitments, and external financing conditions, many of which were associated with measures adopted in response to the COVID pandemic. At the same time, the stabilization of the country’s fiscal trajectory has been hindered by repeated setbacks to the government’s fiscal policy agenda after the 2022 tax reform, including the rejection of subsequent reform bills and the annulment of a key emergency economic decree.

As shown in Figure 7, the fiscal accounts improved in 2023, with total revenues reaching 18.7 percent of GDP, while the overall deficit narrowed to 4.2 percent of GDP and the primary deficit nearly disappeared. Yet even in that relatively favorable year, interest payments still absorbed 3.9 percent of GDP. Part of the improvement in the fiscal balance reflected the 2022 tax reform, one of Petro’s first major initiatives, which increased revenues by around 1 percentage point of GDP by raising taxes on top incomes and dividends, reducing tax benefits for oil and mining companies, and shifting more of the burden toward higher-income taxpayers.

Figure 7

Source: Colombia Ministry of Finance (MHCP).

In 2024, total revenues fell sharply from 18.7 percent to 16.5 percent of GDP, while the overall budget deficit widened to 6.7 percent of GDP and the primary budget deficit (which does not include interest payments) to 2.4 percent of GDP. A central factor was the decline in corporate income-tax payments from the oil and coal sectors after lower international commodity prices reduced taxable profits. Interest payments also rose to 4.4 percent of GDP — the highest level in the period covered by available data — reflecting elevated borrowing costs on top of a still-high debt stock accumulated during the pandemic years. Gross public debt stood at 61.3 percent of GDP at the end of 2024, after surging by 13.5 percentage points during the pandemic (from 51.8 percent of GDP in 2019 to 65.3 percent in 2020). 

In 2025, the primary budget deficit reached 3.6 percent of GDP. But a large part of the fiscal pressure facing the current administration reflects the cost of servicing debt incurred and rigid spending requirements before the administration took office. Any new administration must deal with the lingering effects of its predecessors, but Petro came into office with quite sizable budgetary and policy obligations.

The government subsidizes gasoline through its Fuel Price Stabilization Fund (FEPC), established in 2007. Since 2022, the government has counted FEPC expenditures as a fiscal expense whereas they had previously been categorized as debt and did not affect the fiscal balance. The Petro administration has sought to gradually reduce the subsidies to reduce fiscal pressures; however, there has remained a significant cost: 1.2 percent of GDP in 2024 and 0.44 percent of GDP in 2025. Additionally, the government spent about 0.25 percent of GDP in 2024 and 2025 on additional energy and gas subsidies. 

The Petro administration also fully repaid the $5.4 billion it received through its IMF Flexible Credit Line (FCL) during the pandemic under the Duque administration. Repaying the IMF loan, which was done in 2024 and 2025, cost about 0.6 percent of GDP each year. In addition, Colombia’s Constitutional Court struck down part of the 2022 tax reform, which would have reduced tax deductions made by oil and coal companies. This caused an estimated annual reduction of tax revenues of 0.2 percent of GDP.

In 2024, as mentioned previously, the primary deficit amounted to 2.4 percent of GDP. However, the inherited obligations discussed above totaled 2.3 percent of GDP, almost fully accounting for the deficit. In 2025, these inherited obligations accounted for more than 40 percent of the primary deficit. 

In response to deteriorating fiscal conditions, the government proposed a new financing bill in September 2024 that included higher taxes on top earners, a tax on online betting, and selected environmental and sectoral measures such as a higher carbon tax and taxes on hybrid vehicles. However, the proposal was not approved by Congress, where Petro’s party did not hold a majority. A later attempt to raise revenues through an economic emergency decree was also struck down by the Constitutional Court earlier this year. 

In June 2025, the government activated the escape clause of Colombia’s fiscal rule, arguing that a slower fiscal adjustment path through 2027 was necessary to preserve macroeconomic stability amid elevated debt-service costs and public debt levels. The decision, which faced significant political and institutional resistance, reflected the administration’s broader effort to ease constraints on its financing commitments and social policy agenda. Established in 2011, Colombia’s fiscal rule was designed to safeguard fiscal sustainability by limiting fiscal deficits and debt accumulation. However, the framework also constrains fiscal space, particularly during periods of elevated inherited debt-service obligations, such as the current context in which debt-service costs remain above pre-pandemic levels.

Conclusion

The 2022 election of Petro represented a stark break with the country’s history of conservative governance, and the economic and social results of the Petro administration highlight that shift: drastically reduced poverty, record-setting land distribution, increased social spending, and a significant real increase of the country’s minimum wage. 

Nevertheless, progress has been curtailed by an overly restrictive monetary policy that has greatly constrained private investment and GDP growth and by a Congress that has blocked many of the administration’s most significant reform efforts, including progressive tax reform to raise needed revenues and to ensure a continuation of the government’s social commitments. 

The leading candidates vying for the presidency represent starkly different visions for the country’s future, including on economic and social policies. Iván Cepeda has pledged to preserve and deepen much of Petro’s redistributive and social policy agenda, while Paloma Valencia has emphasized fiscal adjustment through reduced spending and expanded oil and gas production. She has also been one of the leading opponents of several of Petro’s flagship reforms, including the pension and health reforms, arguing that they threaten fiscal sustainability and institutional stability.

Abelardo de la Espriella has campaigned on a more radical right-wing platform centered on punitive security policies, deregulation, and a substantial reduction of the role of the state, drawing on the rhetoric of Nayib Bukele’s “mano dura” security model and Javier Milei’s style of state retrenchment.

The social progress achieved under the Petro administration hangs in the balance of the upcoming vote. However, if Cepeda is to win, it will likely be due to the significant real benefits that many Colombians have experienced under the Petro administration.