Costa Rica expects to collect about â‚¡400,000 million ($882 million) less than it budgeted for 2026, and the Finance Ministry is asking lawmakers to close the gap with a mix of spending cuts and new borrowing that would push the deficit to its highest level since 2020.
The measures are contained in the second extraordinary budget of 2026, now before the Legislative Assembly’s Hacendarios (budget) committee. The bill makes a net reduction of â‚¡167,968 million ($370.4 million) to this year’s national budget and seeks authorization for an additional â‚¡187,000 million ($412.4 million) in borrowing, according to the bill and the Comptroller General’s Office (CGR).
The Judicial Branch takes the largest single cut, at â‚¡13,105 million ($28.9 million). That includes â‚¡5,020 million ($11.1 million) from the Judicial Investigation Agency (OIJ) and â‚¡4,680 million ($10.3 million) from the Public Prosecutor’s Office. The security sector loses about â‚¡12,922 million ($28.5 million), with â‚¡7,445 million ($16.4 million) of that coming from the Ministry of Public Security’s citizen security program. The reduction also eliminates funding for 172 vacant security positions.
The Ministry of Public Education (MEP) faces a cut of about â‚¡8,973 million ($19.8 million). The bill trims â‚¡3,648 million ($8 million) from classroom technology, including laptops, robotics kits and internet connectivity, and â‚¡363.6 million earmarked for a student transportation program that was due to begin in late November. Funding for 10 new schools is moved to 2027.
Across the government, the bill removes â‚¡14,259 million ($31.4 million) tied to 2,714 vacant positions and lowers debt-service spending by â‚¡110,000 million ($242.6 million). The Supreme Elections Tribunal, the Ministry of Environment and Energy and roughly 20 other institutions also see reductions.
Deputy Revenue Minister VÃctor Carvajal told the committee that the drop in collections stems from informal commerce, smuggling, problems with the TRIBU-CR digital tax platform and the exchange rate. Carvajal said the trend could reverse once September and late-October collection figures are tallied.
Deputy Expenditure Minister Luis Molina told legislators the extraordinary budget was necessary because of the decline in revenue. Finance Ministry officials have said they want to contain spending without automatically turning to more debt and without taking on new permanent commitments that lack funding.
The CGR projects total revenue nearly â‚¡400,000 million below budget, of which â‚¡373,000 million ($822.5 million) is tax revenue. The office warned that the bill would produce the country’s largest fiscal deterioration since 2020. According to the CGR, the financial deficit would rise from 4.3% to 4.8% of gross domestic product, or about â‚¡2.5 trillion ($5.5 billion).
The primary balance, which excludes interest payments, would turn negative for the first time since 2021, at a deficit of â‚¡30,000 million ($66.2 million). Because the cuts do not cover the full revenue shortfall, the remaining gap would be financed with additional debt. The CGR also projected that the tax burden would fall to 12.6% of GDP, down 0.7 percentage points.
Acting Comptroller Bernal Aragón recommended measures to strengthen revenue collection and make public income more sufficient and sustainable. The CGR called for a medium-term revenue strategy based on a comprehensive review of the tax system, noting that income, value-added and selective consumption tax receipts have shown weak and at times negative growth for several months.
Aragón also told the committee that no preventive studies had been carried out on how the security cuts would affect public safety, and that such analysis would come with the year-end budget settlement. Julissa Sáenz of the CGR’s public finance oversight area also presented the office’s concerns to lawmakers.
Opposition legislators questioned the approach. Diana Murillo of the National Liberation Party said adjustments are necessary when revenue falls but asked whether repeated cuts of this size point to poor financial planning, adding that presenting cuts is the easier part compared with proposing alternatives.
Frente Amplio deputy MarÃa Eugenia Román said it was ironic that the Judicial Branch is criticized for slow case resolution while its budget is restricted. She also warned that provisions in the 2027 budget could limit new hiring in the courts. The bill does not propose new taxes. It is the second round of cuts this year, after the first extraordinary budget of 2026 reduced spending by â‚¡70,000 million ($154.4 million), including â‚¡40,000 million from the CEN-CINAI child nutrition and care program.
Finance Minister Rodrigo Chaves said in June that cuts were coming for every branch of government. The ruling Pueblo Soberano party holds 31 of the Assembly’s 57 seats, a majority sufficient to approve the bill. The Hacendarios committee aims to issue its reports on the extraordinary budget and the 2027 national budget by tomorrow, after which both go to the full Assembly for debate.
