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A breakdown of savings from Costa Rica’s proposed debt-reduction measures

April 25, 2012

The Costa Rican government believes it can save hundreds of millions of dollars if new fiscal measures are approved. The government released figures that show how a plan, announced by President Laura Chinchilla last Wednesday, could reduce mounting debt.

Here are the primary measures the government wants to pass in order to save money:

The first step involves freezing the salaries of central government employees who make more than ₡3 million ($6,000) a month. According to the daily La Nación, there are 430 government employees earning a salary of more than ₡3 million and 50 other public employees who receive ₡3 million or more.

A wage freeze would save ₡900 million ($1.7 million) a year. If the government factors 3,450 employees in decentralized institutions who make more than ₡3 million, La Nación reported, the government would save ₡18 billion ($35 million).

The government could save another ₡1 billion ($2 million) if pensions greater than ₡3 million are frozen. Reforms for the National Registry and Government Printer could add another ₡7.8 billion ($15.5 million) in savings.

Lowering the amount of contributions the state gives to political parties during campaigns would save ₡6.8 billion ($13.5 million).

The government hopes to sell state property to earn another ₡2.5 billion ($5 million).

Administration officials say Costa Rica could face serious financial troubles if reform isn’t adopted quickly. Government debt is nearing 6 percent of GDP, and the gap is expected to widen, possibly to 10 percent if reforms are not passed by 2014, according to Central Bank officials.

The reaction to Chinchilla’s announcement last week was mainly positive from opposition party members. However, when the measures could be discussed in the Legislative Assembly and how soon they could be implemented are still up in the air.

In addition, to those proposals, Costa Rica intends to recoup another ₡102 billion ($200 million) by creating an electronic invoice for sales tax to try to reduce tax evasion and eliminating tax exemptions on many luxury goods.

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