The Legislative Assembly on Monday approved a project that eliminates annuities for Costa Rica’s public employees over the next two years.
The cost-cutting measure is expected to save more than $110 million across the central government and autonomous public institutions, La Nación reported. Thirty-nine deputies voted in favor of the project in a second debate, while 11 voted against.
The annuity is an additional payment summed to the base salary of public employees that is calculated, in part, on the number of years the employee has worked. The project suspends the calculation of these annuities for 2021 and 2022.
When the project was first introduced earlier this year, the central government hoped the money saved would benefit the National Emergency Commission (CNE) and improve the country’s finances.
Critics of the project argued that public health workers and police officers who have been on the front line of the coronavirus pandemic will be hurt by the changes.
President Carlos Alvarado has said the government and country must “tighten its belts” and reduce costs in order to preserve Costa Rica’s economic stability.
“I am grateful to the Legislative Assembly for the approval in the second debate of the bill that we presented in April of this year for the suspension of the payment of new annuities in 2021 and 2022,” President Alvarado said Monday. “One more action to contain public spending.”
Costa Rica has proposed negotiating an agreement with the International Monetary Fund (IMF) to address a fiscal deficit that has grown over more than a decade.
In 2019, the deficit reached 6% of GDP, and the government projects it to reach 9.3% of GDP this year due to the impacts of Covid-19.