(Bloomberg) -- Colombian finance chief Ricardo Bonilla resigned amid corruption allegations at a critical stage for the government’s bid to raise taxes.

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Colombia’s dollar bonds fell on the news erasing gains for the day. The nation’s five-year credit-default swaps jumped four basis points to 201 basis points.

Earlier today, President Gustavo Petro said in a post on X that he expected Bonilla’s resignation “not because I think he is guilty, but because they want to tear him apart for being loyal to the government program.”

Bonilla is currently defending himself from allegations of corruption. An adviser accused him of having known of lawmakers approving loans in exchange for government contracts that personally benefitted them. He denies wrongdoing.

In a resignation letter addressed to the president, Bonilla said he would work on his defense alongside his lawyers. “The country’s finances are in good health and we maintained fiscal stability despite the internal and external circumstances that we had to face,” he wrote.

His successor will take office as concerns over fiscal stability become paramount for investors. Last week, the finance ministry announced a spending cut of 28.4 trillion pesos ($6.4 billion) to comply with the fiscal rule, after the government failed to meet its tax revenue targets.

At the same time, the government is negotiating with lawmakers higher taxes to finance part of the 2025 budget. However, a faction of independent and opposition lawmakers have rejected more levies.

“Bonilla never became a darling of markets, but by now he’s the devil you know,” said Francisco Campos-Ortiz, an economist at Deutsche Bank in New York. “I still hold some residual faith in Petro’s political instincts, so my gut is that Bonilla’s replacement will be deemed an upgrade, so I’m inclined to think it’d be positive for the peso.”

More cabinet changes are also likely in the next few months, since anyone who wished to run in 2026 presidential elections has to leave office one year before the pre-electoral period.

“This comes at a difficult time for Petro, because there’s a impending cabinet reshuffle with the resignations of all those who want to run for president,” Sergio Guzman, the director of Colombia Risk Analysis, a Bogota-based risk consultancy. “There are very few people with Bonilla’s qualities of trust from the president and loyalty.”

Fiscal Risks

Andres Pardo, a strategist at XP Investments, said that the developments are “definitely not positive.”