Costa Rica: Cost of Debt Up 29%

The country is spending more and more in interest payments for the government's debt, which in 2013 rose to represent 2.6% of GDP.  

Tuesday, February 11, 2014

In 2013 the interest paid by government debts rose by 29%, reaching 2.6 % of Gross Domestic Product (GDP). If the expectations of the Ministry of Finance are correct, the financial situation could become more complicate in 2014, as it is anticipated that this financial obligation would reach 2.9% of GDP.

"The bulk of the interest paid last year was on domestic debt, ie obligations to Costa Rica and corresponded to 9% of the total. Government domestic debt consists mainly of emissions of Treasury bonds in dollars and colones."

" ... The increase in the burden of interest payments on the economy and on state expenditures is due to the fact that they are paying for the highest rates they had years ago," said economist Fernando Rodriguez.

"The problem is compounded because on top of this burden of interest you have to factor in a growing deficit which requires more loans to pay for it. In the end, a larger amount of debt has a snowball effect which will eventually accelerate a growth in interest rates. "

"The placement of bonds in international markets can make the cost of borrowing lower but even so we will see a growing level of interest payments as long as the fiscal deficit remains high," said economist Edna Camacho

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