Gustavo Petro, president of Colombia.

President Petro once again blames former president Ivan Duque for Colombia’s debt due to fuel subsidies and IMF loans. Credit: Joel González / Presidency of Colombia.

Colombian President Gustavo Petro once again pointed to the responsibility that, according to him, lies with his predecessor, former President Ivan Duque, for the country’s mounting debt. During a forum on the Constitution and the social rule of law, Petro criticized Duque over the loan he requested from the International Monetary Fund (IMF) during the COVID-19 pandemic.

In addition, the Colombian president referred to the major deficit caused by the debt generated from fuel subsidies, stressing that the former president did not dare to correct this situation in 2021 due to the social tensions arising from the popular protests at the time against the Duque administration.

It is worth noting that Colombia is facing a crisis due to the rise in public debt, while the government is, so far unsuccessfully, trying to pass a new tax reform in Congress to increase state revenue and reduce pressure on the budget.

Petro once again holds former President Duque responsible for Colombia’s debt

In his remarks, the president again targeted his predecessor Ivan Duque (2018–2022), holding him accountable for the country’s public debt.

According to Petro, “the mistake” made by the Duque administration was borrowing US$5.6 billion from the International Monetary Fund (IMF) in 2020 to respond to the COVID-19 pandemic. That debt, the current president argued, is payable in two years with a three-year grace period, which expires this year, 2025.

“What did Duque borrow for? If extreme and monetary poverty spiked during the Covid years [2020 and 2021],” Petro asked rhetorically, later claiming that the poverty of previous years before the start of his term is due to former President Duque having “borrowed from the IMF.”

Petro noted that no other country in the world borrowed from the international body to deal with the pandemic, and insisted that Ivan Duque did so “to subsidize Colombia’s largest companies — Avianca, El Tiempo, RCN, Gilinsky, etc. — and not to support the Colombian social majority.”

IMF Colombia.IMF Colombia.

During President Duque’s administration, Colombia requested a loan from the IMF to address the economic emergencies caused by COVID-19, a move that has been heavily criticized by Gustavo Petro, as the debt has been paid off during his administration, limiting the public budget. Credit: IMF, CC BY-SA 4.0.

‘Today’s debt is also the fuel subsidy from the Duque era,’ denounced President Petro

Finally, in justifying the current economic strain from debt payments, Gustavo Petro once again referred to his predecessor, stating: “The fiscal deficit of this year and last year is called turning the FEPC (Fuel Price Stabilization Fund) subsidy into debt: 70 trillion Colombian pesos (about US$17.5 billion), more than what we spend on pensions.”

The president argued that Ivan Duque generated that debt “because he was afraid to raise gasoline prices due to the social unrest [popular protests of 2021], when those protesting were the poorest, and they didn’t even use gasoline. But those who do use gasoline are the richest 15% of Colombian society.”

With this, Petro questioned the gasoline subsidy, saying it benefited wealthier Colombians who did not need it, while leaving the state with a multibillion-dollar debt.

This is why, he argued, it should now be Colombia’s wealthiest who must pay off the state’s debt: “Because they were the ones who benefited from the gasoline subsidies and the IMF loans.”

Finally, Gustavo Petro lamented that Congress did not allow the Tariff Option [a regulatory mechanism to prevent abrupt increases in electricity rates] to be converted into public debt. “Where is social justice?” he asked — precisely in a forum on the Constitution and the social rule of law.

FEPC: A relief from 2007 that ended up drowning Colombia’s public finances

FEPC was created in Colombia in 2007 with the aim of smoothing out international oil price fluctuations and shielding local consumers from sudden increases in gasoline and diesel prices. The logic behind this subsidy was simple: when international prices rose, the state would absorb part of the cost to prevent it from being immediately passed on to consumers; and when prices fell, the fund was expected to recover resources.

However, the mechanism did not work as intended. For years, while oil remained expensive, FEPC accumulated growing debts because the government did not pass the real cost of fuel on to users. This allowed prices to remain artificially low, but at the expense of generating an ever-larger fiscal deficit.

In recent years, with rising oil prices following the pandemic and the war in Ukraine, the FEPC’s financial hole skyrocketed to historic levels, surpassing 30 trillion pesos (about US$7.5 billion). The subsidy became one of the main challenges for public finances, as the state had to decide between continuing to finance the fund — at a high fiscal cost — or gradually passing on the increases to consumers.

When Gustavo Petro took office in August 2022, the government decided to phase out FEPC. In recent years, not without difficulties, fuel prices have been gradually raised to their real market value, with the aim of ending the financial bleeding that maintaining this subsidy meant for the state.

Gas station in Bogota, ColombiaGas station in Bogota, Colombia

Since 2022, fuel prices in Colombia have gradually increased to reach their real market value, ending the FEPC subsidy. Credit: A.P. / Colombia One.