The fiscal debate in Colombia has reached its most critical point: the 'Cuéllar strategy' and the 2026 bombshell.

The fiscal debate in Colombia reached its most critical point with the government's presentation of the National General Budget Bill, which includes a financing law, that is, a new tax reform, exceeding the limits established by the Medium-Term Fiscal Framework (MFMP) presented by the same government in June. What should have been an exercise in fiscal responsibility is becoming a desperate strategy to sustain an unsustainable model of spending expansion and tax pressure.

In this context, the Public Credit Directorate's strategy, led by Javier Cuéllar, to finance the final stretch of the current administration has gained prominence. Presented as a sophisticated portfolio management operation , this maneuver seeks to show a reduction in the cost of public debt projected for 2026. However, behind the technicalities lies a high-risk operation that could transfer fiscal vulnerabilities to the next administration.

Essentially, the National Treasury uses cash resources to repurchase bonds at a discount and use them as collateral in an external credit operation in Swiss francs . The objective is to use the borrowed resources to build a portfolio of assets with higher interest rates (US Treasury bonds, TES, and dollar bonds). This is a classic carry trade strategy, where money is borrowed in a country with low interest rates and invested in another country with higher rates. The idea is to earn the difference between what is paid for the loan and what is earned on the investment.

It is a valid financial exercise whose main benefit is maximized if, within the term of the loan, the exchange rate in Colombia does not rise, a situation that is difficult to anticipate given the current global uncertainty. At the same time, it is an exercise in demand because higher rates are being offered than those on the bonds being repurchased.

In theory, the strategy reduces the short-term interest burden. The apparent appeal lies in the difference between the funding rate (1.5% in Swiss francs) and the rates of return on the acquired assets (ranging from 4% to 11%). This gap would reduce the short-term financing cost for the nation. However, the operation is not without multiple risks.

First, the operation does not generate new liquidity: it uses existing cash to cover the haircut of the bonds used as collateral and, furthermore, commits resources that could have been allocated to other needs . In practice, the Treasury now has less liquidity available than before the strategy.

Second, the currency risk is significant . Since flows are denominated in Swiss francs, dollars, and pesos, and the country has no active currency hedges, any appreciation of the Swiss franc—as is already occurring—or a devaluation of the peso could translate into substantial losses.

Added to this is a third risk: refinancing. The operation is short-term (maximum one year), so when it matures, the government will have to return to the market to seek possibly higher rates. In other words, it buys some time today, but the problem worsens tomorrow.

Furthermore, there is a structural mismatch. International reserves in Swiss francs are marginal (0.17%), and exports to Switzerland are practically nonexistent. There are no natural assets to back obligations in that currency, which reinforces the risk of financial imbalance.

The strategy also appears designed to artificially improve the debt-to-GDP ratio, since it is calculated based on the nominal value of the debt. By buying back bonds at a discount and replacing them with new bonds close to par value (with higher coupons), the debt-to-GDP ratio "on paper" is reduced, but at the cost of paying more interest over time.

In that sense, it's not a structural solution. It's an accounting gimmick that simulates fiscal discipline , while actually increasing future commitments.

The analogy is clear: it's as if a heavily indebted person were to use what little cash they had left to move money between accounts and access more cheap credit . It works for a while, but it doesn't address the root of the problem. Without a sustainable income or spending control, the debt only accumulates.

The most worrying thing is that this operation distorts the debt market. Rates have fallen, yes, but not because there is a perceived lower risk, but because the government itself is actively intervening in the market by buying its own bonds . It's an artificial signal that creates a false appearance of confidence.

The paradox is that several international funds (such as the sovereign funds of Norway, the Netherlands, and the Bank of Singapore) are buying these bonds not because they trust in the current sustainability, but because they assume that there will be a change of government in 2026, and with it, a correction in the fiscal course. Meanwhile, the current government is benefiting from this expectation to exacerbate the imbalance its successor will inherit.

The "Cuéllar strategy" is, at best, a time-buying operation; at worst, a fiscal time bomb. It postpones the necessary adjustment, reduces available cash flow, increases foreign exchange exposure, and commits the country to higher interest rates.

The cost will not only be financial, but also political and institutional. If the markets lose patience—and faith in a future correction—the consequences could be immediate. The cost is not only economic, but also political and institutional. When the bomb explodes—because it will—the country will have fewer tools to deal with it.

(*) Professor at the School of Economics at the National University. (**) Razón Pública is a non-profit think tank that aims to empower top analysts to have a greater impact on decision-making in Colombia.