Costa Rica Coffee Guide

Facing rising deficit, Costa Rican government announces fiscal consolidation plans

February 11, 2020

Facing a fiscal deficit that reached 6.96% of GDP in 2019, the country’s highest figure in decades, the Costa Rican government on Monday announced a plan that aims to consolidate finances and encourage economic growth without applying further taxes.

According to a press release from Casa Presidencial, the strategy involves:

  • Amortization of debt: The Finance Ministry hopes to use profits from the state banks, the National Insurance Institute (INS) and Correos de Costa Rica to pay outstanding interest payments. The Costa Rican Tourism Board (ICT) said it would contribute its ¢14 billion (about $24.5 million) surplus to the Finance Ministry for this purpose. In addition, the Costa Rican government would approve the sale of the International Bank of Costa Rica (BICSA) — based in Panama, and employing no Costa Ricans — and the sale or concession of the National Liquor Factory (FANAL) to further curb the growth of state debt.
  • Reducing tax evasion: A $160 million loan from the World Bank will help Costa Rica manage an online platform to improve tax collection and mitigate tax evasion. The Finance Ministry would also review current tax exemptions.
  • Reducing public spending: The government would merge certain institutions (superintendencies) and pass a law to regulate the salaries of public employees.
  • Replacing expensive debt: The Finance Ministry asked for an approval of $4.5 billion in Eurobonds to pay off high-interest loans. This would allow Costa Rica to save significantly with lower interest payments.

Speaking before the Legislative Assembly, Finance Minister Rodrigo Chaves Robles predicted the measures “would allow Costa Rica to reach a primary fiscal surplus in 2021.”

“Without touching the pocket of people, without more taxes or reducing public services, Costa Rica can and should consolidate public finances on the solid foundations of fiscal reform,” he said.

Chaves also argued that the Law on Strengthening Public Finances, passed in late 2018, had helped Costa Rica avoid a more significant financial crisis. The legislation had been met with widespread protests from Costa Ricans who alleged the bill placed undue burden on the lower and middle classes.

In addition to the rising deficit, Costa Rica in 2019 saw unemployment rise to 12.4%, among the highest figures in Latin America.

You may be interested

Costa Rica allows reopening process for public parks and recreational facilities
Costa Rica
13 views
Costa Rica
13 views

Costa Rica allows reopening process for public parks and recreational facilities

Alejandro Zúñiga - October 27, 2020

Costa Rica will allow for the gradual reopening of public parks and certain recreational facilities, the Health Ministry and National…

Costa Rica coronavirus updates for Tuesday, October 27
Costa Rica
5934 views
Costa Rica
5934 views

Costa Rica coronavirus updates for Tuesday, October 27

Alejandro Zúñiga - October 27, 2020

Costa Rica announced 17 new coronavirus-related deaths over the last day for a total of 1,329, according to official data…

Clarifying the isolation requirement for Costa Rican citizens
Costa Rica
7 views
Costa Rica
7 views

Clarifying the isolation requirement for Costa Rican citizens

Alejandro Zúñiga - October 27, 2020

Last week, the Costa Rica Tourism Board announced that, as of October 26, citizens would no longer need to quarantine…