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World Bank supports Costa Rican spending cuts

June 1, 2018

The World Bank expressed support Thursday for the spending cuts proposed by the government of Costa Rica to address the country’s fiscal deficit, which has reached 6.2 percent of GDP.

Finance Minister Rocío Aguilar visited the Legislative Assembly Wednesday to present a package of drastic cuts that includes a public hiring freeze, salary freezes for senior public officials, and reductions to the government’s budget for travel expenses, propaganda, travel and events.

“The major challenges that Costa Rica currently faces are reducing the fiscal deficit and stabilizing public debt, given that they’re a threat to the principles that govern its social [programs],” World Bank representative Fabrizio Zarcone said in a news release.

He added that “although the measures announced by Minister Aguilar are not enough to reduce a fiscal deficit of this magnitude, they’re necessary to start a path toward consolidation.”

Zarcone insisted that the legislature must also approve a public finance bill to allow tax reform and additional cuts to public spending.

The last four Costa Rican governments have attempted to enact tax reform without success, and the deficit has continued to grow.

Opposition parties in the Legislative Assembly have conditioned their support to tax reform on austerity policies from the government.

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