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Tuesday, May 24, 2022

Costa Rica meets with IMF to discuss financing options to face crisis

Economic authorities in Costa Rica met with the International Monetary Fund (IMF) and asked for a line of financing that would allow it to face the financial blow caused by the coronavirus pandemic, the government reported Tuesday.

Representatives of the IMF had virtual work sessions Wednesday and Thursday with the president of the Central Bank of Costa Rica (BCCR), Rodrigo Cubero, and the Ministers of Planning, Pilar Garrido, and of the Treasury, Rodrigo Chaves, the presidency said in a statement.

“The IMF has proposed that COVID-19 measures should be extraordinary in order to protect people,” President Carlos Alvarado said Thursday. “For this, we propose that interest rates for budget support should be zero, fixed, and long-term.

“I call for support for this proposal, especially [for] mid-income developing countries.”

The spread of the novel coronavirus will amplify Costa Rica’s economic struggles. The country, already facing a fiscal deficit of more than 6% of GDP, is now confronting a health and social emergency due to the closure of businesses and increase in unemployment.

The economic authorities of the Central American country presented to the IMF its roadmap to face the crisis and at the same time keep public finances healthy.

“A program with the IMF strengthens the credibility of government policies and guarantees that Costa Rica’s public debt is sustainable over time,” Minister Chaves said.

At the beginning of the year, the Central Bank predicted a reduction in the fiscal deficit to 5.9% of GDP and economic growth of 2.5% by 2020. But the projections collapsed with the pandemic, which is affecting key sectors of the economy, such as tourism and commerce, and has forced the government to increase spending on healthcare and social assistance programs.

Taking into account the health crisis, risk rating agency Moody’s projected a fiscal deficit of 8% of GDP, while the IMF forecasts a 3.3% drop in the Costa Rican economy.

Chaves indicated that the government intends to seek favorable conditions from international financial organizations to meet the needs caused by the new coronavirus.

This story was updated with President Alvarado’s statement.

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