IMF and Colombia: What Would the Country Have to Give Up to Get Financing?

What Colombia actually requested — and what it did not

Three letters that in Latin America trigger an immediate reaction: IMF. For some it means discipline. For others, austerity. And for many, simply that a country is already in trouble.

When Colombia opened conversations with the International Monetary Fund, the public debate jumped immediately to extremes: either this is a bailout or it is a capitulation to the markets. But before reaching those conclusions, a fundamental confusion needs to be cleared up.

Colombia talked to the IMF. That does not mean Colombia signed a formal rescue. It does not mean the Fund has disbursed any money. And it certainly does not mean the IMF is now governing Colombia's economy. What exists, as of this episode, is something far more preliminary. These are early-stage conversations.

To understand what is actually happening, three entirely distinct stages of the relationship between a country and the Fund must be distinguished:

The government requested a technical mission from the IMF to review the fiscal situation, economic projections, and the plan for correcting public finances. A Ministry of Finance delegation continued the conversations in Washington, and according to publicly available information, possible financing alternatives on better terms have also been explored.

The first conclusion, then, is straightforward: Colombia has not requested a formal bailout. But if it eventually moves from advisory to financing, the entire conversation changes. And that is the real question worth analyzing.

Why knock on that door? The answer is credibility

There is a question many people have but few frame correctly. It is not whether the IMF is coming to rescue Colombia. The right question is why Colombia is knocking on that door. Does it need money? Does it need credibility? Does it need discipline? Or perhaps all three.

For Castro, the most honest answer is one: credibility. The government needs to demonstrate that its fiscal diagnosis, projections, and adjustment plan are credible. And when an institution like the IMF reviews those accounts, international markets pay attention — not because the Fund has a crystal ball, but because it has technicians, methodologies, information, and a reputation built around evaluating national economies.

There is something important in the language the IMF itself used during this process. The Fund did not say it was going to design Colombia's economy. What it said is that it is willing to support a reform program designed by Colombian authorities themselves. And to describe it, the Fund used a phrase in English:

That matters because it breaks with a very common caricature: the idea that IMF officials land in Bogotá with a closed list of orders and the Colombian government simply signs. It also implies something more: if an agreement is eventually reached, it would be too easy to say afterward "the IMF forced us." Colombia would bear direct responsibility. The government negotiates, the government accepts, the government signs, and the government would need to explain to the country what it obtained, what it committed to, and why it considered it worthwhile.

During a visit to Colombia, the IMF's First Deputy Managing Director also delivered a clear assessment of the country's situation:

The message was sober. Not "Colombia is on the edge of collapse," nor "nothing is wrong here." It was much more honest: real strengths exist, and there are challenges that need to be corrected.

The conditions: what the IMF considers important

The word that generates so much fear arrives: conditions. Castro is clear on one point: today there is no list of IMF demands for Colombia. There is no signed agreement. It would be irresponsible to say the IMF will raise VAT, eliminate a subsidy, or order a particular cut. None of that has been agreed.

What is known are the areas the Fund itself considers important for Colombia at this moment:

There is something Castro highlights as particularly important: the IMF's recent message for Colombia included a word that does not always appear in these conversations. That word is growth. The Fund explicitly mentioned private investment, productivity, infrastructure, education, energy, and formalization — that is, conditions for businesses to grow. Not just cuts.

A poorly designed adjustment can improve a number while deteriorating the capacity to grow. Imagine a family with financial problems that decides to solve them by stopping all spending: not fixing the car needed for work, taking the kids out of school, stopping maintenance. Monthly expenditure falls, but did it actually solve the problem or just create new ones? A good program would need to try to avoid precisely that.

The adjustment dilemma: who picks up the tab?

To understand what is at stake, Castro uses a business example. A company has sales, assets, customers, and employees, but over time started spending more than it took in. It borrowed, then used new loans to cover earlier obligations, and one day finds that getting new money is increasingly expensive. The company still functions — it is not bankrupt — but it needs to put its finances in order.

When that company goes to the bank for financing, the bank does not hand over money and say "see you in five years." First it asks how much is owed, how much is being produced, where the spending is going, how the problem will be corrected, and how repayment will happen. With all due proportions, that logic helps explain what would happen if Colombia moved from current conversations to requesting formal financing. The discussion would no longer be just how much money is needed, but what plan exists to avoid ending up at the same point again.

And here comes the uncomfortable moment: the word conditions. Behind the words reform, fiscal consolidation, and adjustment, there are real people:

Any serious program would need to answer a very concrete question: how the burden will be distributed. Not just how much is adjusted, but who carries it and how much. That question stops being technical and becomes deeply political. And it is precisely the one most frequently left without a clear answer in public debates about the IMF.

A cheap loan can turn out to be very expensive if the conditions attached to it force bad economic decisions. But rejecting useful financing out of ideological prejudice can also be very costly. The real dilemma is not whether the IMF is good or bad. It is whether the specific agreement on offer is beneficial for Colombia.

The four tests: when does a deal actually work for Colombia?

Castro arrives at the final question. Not "is the IMF good or bad?" — that would be too simplistic. The right question is: when does an IMF agreement actually make sense for Colombia? For that, he proposes four tests.

The IMF itself has recently insisted that any program for Colombia should be designed by national authorities and seek balance among fiscal discipline, growth, and protection of vulnerable sectors. That should be the standard.

Going to the IMF should not be a source of shame, but it should not be celebrated as a medal either. It is a tool. It can be useful or it can be inconvenient, depending on the agreement, the conditions, the moment, and the government's ability to fulfill what it signs.