Costa Rica on Saturday asked the International Monetary Fund (IMF) to begin negotiations for a three-year assistance agreement, in which the government would agree to apply fiscal adjustments, to face the economic impact of COVID-19.
The president of the Central Bank, Rodrigo Cubero, and the Minister of Finance, Elian Villegas, made the request in a letter sent Saturday to the managing director of the IMF, Kristalina Georgieva, in which they requested financial assistance for $1.75 billion, reported the presidency in a statement.
The request for negotiations came after the Legislative Assembly (parliament) approved this week a quick loan from the IMF for $504 million for debt management.
“The agreement would provide a policy anchor for our fiscal consolidation plans for the period necessary to achieve a primary surplus and place debt on a clear downward trajectory,” the letter said.
It adds that “this, in turn, is necessary to ensure a vigorous economic recovery after the pandemic and a greater trajectory of economic growth in the medium term.”
Costa Rica had a fiscal deficit of 6% of GDP in 2019 and the government fears that it will reach more than 9% this year as an effect of the pandemic, while public debt would reach 70% of GDP.
At the same time, the Central Bank projects an economic contraction of 5% for 2020.
“This medium-term agreement with the IMF would provide important resources to the central government under favorable conditions and would allow access to additional financial resources by international financial organizations,” Villegas said.
The Minister of Planning, Pilar Garrido, commented that “this agreement is critical within the fiscal consolidation path to provide confidence to investors that we will take all necessary actions, in a responsible and technical manner, to enable potential, inclusive and sustainable growth.”
The Central American country, which announced on Wednesday a transition to a “controlled opening” of economic activities, has been hit hard by the pandemic, totaling 39,699 infections and 418 deaths.