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Legislators give first nod to financing budget with debt

November 20, 2009

Opposition leaders are criticizing a proposal by the majority party to fund the operating budget with debt, claiming the move violates a specific clause in the budget law that prohibits such practices.

Twenty-eight legislators, mainly from the National Liberation Party, approved the proposal Tuesday, moving the bill toward a second debate, expected Thursday.

The bill, which allows Costa Rica to finance 18 percent of its $8 million budget with debt, is “illegal and unconstitutional,” opponents say, because it directly violates Article 6 of Law 8131.

But President Oscar Arias´ administration defended the move, saying it was the only way to lift Costa Rica out of the worldwide economic crisis.

At the beginning of last year, as Arias watched economic indicators for neighboring countries dip into the red, he increased scholarships and beefed up welfare programs to mitigate potential problems here.

Yet, the social initiatives cost more than the government had on hand to spend, especially because the government was collecting fewer taxes.

Minister of the Presidency Rodrigo Arias assured the press on Wednesday that Costa Rica was not in a financial crisis.

“We are on a secure level financially,” he said. “Our debt is lower today than the debt we inherited at the beginning of this government.”

The Arias administration took office in May 2006.

To continue programs begun in 2009 and fund new initiatives, Arias said he needs what amounts to a 12.23 percent increase, which will fund 700 new police positions, poverty alleviation and a food security program.

But legislators still questioned the Arias administration´s financial management strategies. They expect to revisit the proposal in a second debate on Thursday.

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