Costa Rica’s fiscal deficit reached 6.96% of GDP in 2019, the highest of the last three decades, the Ministry of Finance reported Wednesday.
The result exceeded the official forecast of the Central Bank of 6.2% of GDP by the end of 2019.
The figure comes despite the fact that Costa Rica adopted a tax reform at the end of 2018 that included tax increases to address the deficit.
The Minister of Finance, Rodrigo Chaves, explained at a press conference that the deficit grew more than expected due to the payment of interest on the public debt to meet government expenses.
“In a country that collects 13% of GDP in taxes, 49% of what the State collects goes in interest payments. It is essential to exchange expensive debt for cheap debt,” Chaves said.
Following the approval of the tax reform, the government asked the Legislative Assembly (parliament) for authorization to issue $6 billion in Eurobonds, but the legislators only approved $1.5 billion.
The minister said that he will ask the Legislative Assembly for a new authorization for the remaining $4.5 billion, which would allow Costa Rica to save significantly with lower interest payments.
In addition, the minister said the government will intensify the fight against tax evasion to help reduce the gap in government accounts.