HomeNewsCosta RicaCosta Rica's dire financial situation

Costa Rica’s dire financial situation

Two years after passing a controversial fiscal-reform project, Costa Rica remains on tenuous financial grounds.

At an individual level, the pandemic and related measures have exacerbated unemployment. Nearly half of Costa Rican workers are unemployed or underemployed, representing tens of thousands more people in that situation compared to 2019.

At a national level, Costa Rica has the third-highest public debt in Latin America, according to a new report from the United Nations Economic Commission for Latin America and the Caribbean (CEPAL).

Public debt — the amount of money a government owes to outside debtors — reached 66.2% of Costa Rica’s GDP, trailing only Argentina and Brazil in the region.

Consequently, the government is spending more on interest payments. According to CEPAL, the amount Costa Rica allocates for interest grew more than for any other Latin American country over the last year.

As a result, Costa Rica has turned to outside financial institutions for loans, which the government says would allow it to renegotiate debts, spend less on interest payments and invest in social programs.

The International Development Bank (IDB) has approved a $250 million loan, but the decision by legislators not to approve the financing before their end-of-year vacation means the country will almost certainly lose access to this money.

Another source of financing is from the International Monetary Fund. In January, Costa Rica will begin negotiations for a $1.75 billion loan over three years from the IMF.

This, too, faces significant internal opposition; earlier this year, Costa Ricans across the country protested the potential IMF deal, because the government had planned to raise some taxes to pay back the loan.

Costa Rica’s new IMF proposal includes fiscal consolidation worth 3.0% of GDP, of which 0.8% would come from new taxes.

The Costa Rican Presidency argues that even if the country can reduce spending, outside financing is necessary.

“In the 1980s, we already experienced a crisis born from debt problems,” a video produced by the government said. It referenced the skyrocketing inflation, devaluation of the colón and poverty that characterized that period in Costa Rica.

But even if Costa Rica does obtain IMF financing, experts say the country will face ongoing debt challenges.

According to U.S.-based Fitch Ratings, the IMF loan “could serve as a policy anchor to support fiscal consolidation and free some additional multilateral funding at lower borrowing costs.” However, without additional measures, it “might prove insufficient to stabilize central government debt.”

“We forecast interest payments will reach 38% of central government revenues in 2020, or 21.4% of general government revenues,” Fitch Ratings says.

As the Legislative Assembly adjourns — delaying most new legislation until the new year — Costa Rica will end 2020 with critical financial decisions unresolved.

Trending Now

Dollar Rebounds From Record Low but Year-End Could Favor the Colón Again

The dollar hit its highest level since June after a record low, but seasonal inflows could push it back down. Here is what banks are paying.

Fire Forces Costa Rica IMAX Theater to Close Indefinitely, Leaving One Left in Country

A Saturday fire at Ciudad del Este in Curridabat has shut Nova Cinemas and one of Costa Rica's two IMAX screens until further notice.

Who is behind Costa Rica’s proposed AI data centers?

Two AI data centers seek vast power and water in Costa Rica. Who is financing them is still unknown.

Remote Osa Eco-Lodge Playa Cativo Joins Small Luxury Hotels of the World

Playa Cativo Lodge, a secluded beachfront retreat on the Golfo Dulce in Costa Rica's Southern Zone, has been admitted into Small Luxury Hotels of...

Costa Rica Mayor Asks Who Allowed Building at Protected Playa Blanca

Garabito's mayor questions how roads and homes were built at Playa Blanca, protected as a marine wetland since 1994.

Costa Rica Changes Route 1 Traffic Pattern Near San Ramón

Drivers using Route 1 between the Central Valley and Puntarenas is facing a new traffic pattern today as construction continues around San Ramón. The...

Costa Rica Foreign Investment Jumps 23% as Tourism Investment Falls 27%

Free zones drove a 23.4% rise in Costa Rica's foreign direct investment in the first half of 2026, while tourism investment fell 27%.

Ciudad Quesada–Aguas Zarcas Road Closed for Weeks After Collapse

Anyone traveling between Ciudad Quesada and Aguas Zarcas will need to use alternate routes for at least a month after heavy rain washed out...

Human Trafficking Cases Reach 16-Year High in Costa Rica

Costa Rica recorded 83 human trafficking victims in 2025, the highest number reported in any single year since at least 2010, according to figures...
Loading…

Latest News from Costa Rica

Costa Rica Coffee Maker Chorreador
Costa Rica Car Rentals
Costa Rica Travel Insurance
Costa Rica Travel