'Playing with fire': The messages Colombia received after the IMF meeting

The sky was clear, and temperatures outside remained above normal for this time of year, but in the rooms where the discussions took place, the atmosphere was different. “ It felt like there was a very dark cloud hanging over us ,” commented one attendee at the spring meetings convened by the World Bank and the International Monetary Fund (IMF) in Washington on Friday.

It was no wonder. The meeting—which brought together delegates from 191 countries that are part of the aforementioned entities—took place just three weeks after "Liberation Day," that April 2nd, when Donald Trump announced an unprecedented tariff hike against the United States' trading partners. Since then, turbulence has dominated the markets. Regarding the major stock exchanges, stock prices experienced a sharp initial drop, which has been followed by successive ups and downs depending on the news at the time. Although the lows from the beginning of the month are behind us, the losses in value are estimated at several trillion dollars.

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At the same time, commodity prices reflect both pessimism and uncertainty. Oil remains below $70 a barrel amid perceptions that global demand for crude will be weaker , while an ounce of gold—a safe haven asset in difficult times—broke another record, reaching $3,500 on Tuesday.

Even if things calmed down a bit in the days that followed, the feeling of being on the brink of collapse persists. And the instability is already beginning to take its toll on the global economy.

Change of scenery

That things have changed a lot since the beginning of 2025 is evident when examining the IMF's most recent projections. The growth forecast for this year is now 2.8 percent, half a percentage point lower than in January .

(You may be interested in: The Ministry of Finance issues a statement on the conditions of the IMF's flexible credit line .)

The cut is across all nations, but will be felt more strongly in certain places. In the case of the United States, the reduction is 0.9 percentage points , making it clear that the White House's promise of unprecedented prosperity is far from reality.

Many believe that even the outlook presented is overly optimistic. Several organizations speak of an imminent recession in the land of Uncle Sam due to problems with the adequate supply of inputs for industry and commerce , higher prices for imported goods, and the collapse in consumer sentiment, which should translate into lower spending.

Added to this is the threat of higher inflation, which, according to several analysts, could reach around 5 percent annually in the second half of the year, double the current figure. If this happens, the likelihood of the Federal Reserve Bank lowering its interest rate decreases , which is bad news for those hoping for relief on their loans. There were plenty of people in Washington who claimed that the International Monetary Fund had softened its assessment to avoid angering Trump. It is well known that right-wing think tanks, such as the Heritage Foundation, have proposed the United States' withdrawal from the organization.

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While US Treasury Secretary Scott Bessent himself dismissed this possibility, there is criticism of the IMF's management. According to the official, the IMF " has suffered from mission creep " and " devotes a disproportionate amount of time and resources to working on climate change, gender issues, and social issues ."

Whatever the case, there's no doubt the situation is serious. The main reason is the trade war that brought US tariff rates to levels not seen in over a hundred years, and the similar responses adopted by other countries.

For those who wish to draw parallels with the past, the Fund emphasizes that the context is very different. “ Unlike the previous century, the global economy is now characterized by a high degree of economic and financial integration, with supply chains and financial flows crisscrossing the globe, which, if disrupted, could become a major source of unrest ,” it argues in its report.

In this regard, there will be those who say that the most severe punishments are suspended for at least three months. The Republican administration's plan is to reach bilateral agreements with dozens of nations with which it is engaged in talks during that time. There are also conciliatory signals toward China that could eventually lead to an understanding between the two major world powers .

(More: Latin American countries with the highest economic growth in 2025: how Colombia will fare ).

However, even if everyone reverses course and tariffs return to the level they were at the beginning of January, the damage is likely to be irreversible. Perhaps the greatest is trust in a person's word, a key element in both international relations and business operations.

Although intangible, the loss of US credibility is so significant that it will lead to a redefinition of the trade, investment, and diplomatic ties built over decades . The sense that the spirit of cooperation has been replaced by the rule of law will act as a drag on the global economy going forward.

Among the many potential ramifications of the new global order is the questioning of the dollar's supremacy as the currency par excellence and the preferred reserve asset. Many things could happen, but even without considering the most pessimistic scenarios, no one—except for Trump officials who describe him as a kind of strategic genius—believes that better times are ahead.

The tips

It's impossible to know for sure where or when the worst storms will strike, but with hurricane season on the horizon, it makes sense to take preventive measures. The International Monetary Fund says countries " must take action in the areas of domestic policies and structural imbalances to ensure the stability of their economies ."

Further on, it notes that " restoring fiscal space and placing public debt on a sustainable path remains an important priority ." The entity's concern is that a more hostile international environment will make it much more difficult to meet public and private obligations.

(Read more: IMF places two-point conditions on renewal of flexible credit line to the country .)

It remains to be seen whether these proposals were understood by the Colombian delegation that was in Washington and was led by Finance Minister Germán Ávila . Reports from the office show him meeting with officials from organizations such as the World Bank and the International Finance Corporation before returning to Bogotá on Thursday, even though the formal meetings had not yet concluded.

Those who follow these events knew in advance that the most important part of the trip was to talk with the top brass of the International Monetary Fund , with whom things are not going well. The explanation is that, unlike what had been traditional in the past, there are still questions that have not been satisfactorily resolved.

Like all signatories to the organization's founding agreement, Colombia is subject to what is known as the Article IV consultation each year. This is a process in which several of the organization's technicians come to the country in February to examine the macroeconomic situation, gather information, and engage with authorities .

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Once they raise concerns and receive explanations, the experts issue a report containing a series of policy recommendations. This report is published, in our case, between March and April. The final step is for the text to be submitted to the IMF's Executive Board, which discusses its content and provides its feedback, usually in May .

However, this timeline has been altered. Last Friday, the 18th, the IMF issued a press release regarding two visits to Bogotá by members of its specialized staff.

Aside from initial praise for the improved growth rate and the decline in inflation, the statement states that " fiscal deficits and public debt have risen more than expected ." The text acknowledges the intention to reduce the bulging deficit in public finances and notes that " the authorities are working on policies that will support the projected improvements in tax revenue, as well as on the necessary spending adjustments ."

The friendly tone regarding the positive atmosphere of dialogue makes it essential to read between the lines. Those who know these things emphasize that, at the end of the communication, it states that " the Article IV consultation will continue ." This, in practical terms, means that the issue is not closed and that it has taken much longer than on previous occasions . At first glance, this might not seem so important. After all, Colombia is in the process of repaying the flexible credit line granted by the Fund and used during the pandemic, which will be repaid this year.

(Read also: Remuneration and recognition, pending tasks of the National Care System ).

But even if the goal is to remain free and sound, there is a significant underlying reason. Since the instrument's creation, the country has been included in a select group of economies that could access these resources without having to undergo detailed scrutiny or be subject to conditions, something very different from what happens to nations like Argentina.

More than having a pre-approved quota, what ultimately mattered was the seal of reliability regarding the Colombian economy. This served as a letter of introduction when it came to obtaining loans or attracting investment, with the argument that, despite the difficulties, management remained responsible .

On paper, the positive rating Colombia received last year is valid until 2026, when it will be re-evaluated. The problem is that the terms of the facility include a mid-term review, which, in turn, is tied to the Article IV report, as IMF spokesperson Julie Kozack pointed out yesterday in a formal statement . The report must explicitly state that Colombia has a strong macroeconomic policy framework. If these words are not included in the final report, the country will fail the evaluation and lose the status it achieved, something that is currently seen as inevitable. This would be equivalent to a downgrade and would confirm the heightened risk perception reflected in debt markets and announced by rating agencies.

(Also: The fiscal deficit, a challenge that remains in force in 2025 for Colombia ).

It's now undeniable that Colombia pays much more than its regional peers. A few days ago, the Ministry of Finance highlighted the placement of two global bond issues with five- and ten-year terms , each for $1.9 billion, with annual yields of 7.5 and 8.75 percent, respectively.

By comparison, the CAF Development Bank has been allocating bonds maturing in 2030 at 5 percent per year, and Peru has just sold bonds maturing in 2035, yielding 6.45 percent per year. This means that the interest we must pay is 50 percent higher than that owed to the Andean-based bank and 36 percent more expensive than that of our southern neighbor .

And those margins won't be reduced unless the Petro administration demonstrates a credible strategy to put its accounts in order. Since the attempt cost former minister Diego Guevara his job, the likelihood of progress on this front is low.

Thus, the danger of entering a vicious cycle of more negative balances and greater credit needs to cover the shortfall is real. This, which would be worrying in normal times, is now truly serious, as accounts receivable continue to rise in a more hostile world where the maxim "every man for himself" applies. For this reason, we must sound the alarm so that the Casa de Nariño understands that, by playing with fire, it is not making a mistake, but rather an irresponsible act .

Ricardo Avila

In X: @ravilapinto