Debt Plan and Fiscal Uncertainty

To ensure financing for its future functions, the Costa Rican government will seek loans from the World Bank, IDB, CABEI and CAF during 2020, and plans to insist on the approval of $4.5 billion in Eurobonds.

Monday, January 20, 2020

For this year, the Costa Rican government plans to continue negotiating loans for budget support with the World Bank, the Inter-American Development Bank (IDB), the Central American Bank for Economic Integration (CABEI) and the Andean Development Corporation - Latin American Development Bank (CAF).

Pilar Garrido, Minister of Planning and coordinator of the Cabinet's economic team, told Elfinancierocr.com that "... We have some budget support credits directed to multilaterals that are in a definition stage to be presented in this year's plans. The aim is to leverage us with loans and Eurobonds to improve the debt profile."

In 2019, the executive plans to issue $6 billion in Eurobonds, but the Legislative Assembly approved the issuance of only $1.5 billion, arguing that the amount proposed at the outset was too high.

See "Costa Rica Issues $1.5 Billion in Eurobonds"

Despite the negative response from the congressmen, the Alvarado administration maintains its hopes of obtaining legislative approval and thus capturing the $4.5 billion in financing from the foreign market.

The article says that "... The Ministry of Finance is working on a new bill in which it will request the issuance of Eurobonds to meet this year's needs with the aim of improving the profile of the debt with longer terms and more convenient rates".  Garrido confirmed that "... the text is being drafted to enter the legislative stream at a 'good time'."

Also see "Eurobonds: Risk Rating Confirmed"

Regarding the issue, in July 2019 the risk rating agency Fitch Ratings explained that because the plan of the Ministry of Finance to place $ 6 billion in the foreign market was not approved, fiscal uncertainty could resurface in Costa Rica during the coming years.

Fitch said in mid last year that financing needs remain onerous. The rating agency estimated that sovereign financing needs were 5.5% of GDP by 2019 (2.4% of GDP for debt repayments and 3.2% of GDP for budget financing) and will average 11% of GDP in 2020, 2021 and 2022.

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More on this topic

Costa Rica Postpones Eurobonds to 2021

March 2020

Treasury authorities announced that plans for this year are to negotiate with the Legislative Assembly for approval to issue debt in the international market, and if approved, the issuance would take place in 2021.

Last year the executive branch's plans were to issue $6 billion in Eurobonds, but the Legislative Assembly approved the issuance of only $1.5 billion, arguing that the amount proposed at the beginning was too high.

Costa Rica: Government Urges to Issue More Eurobonds

September 2019

The Ministry of Finance plans to present a new bill in the Legislative Assembly to issue $4.5 billion in foreign debt bonds next year.

The amount that will be requested is what is needed to reach the $6 billion that was requested this year before Congress, of which only $1.5 billion was authorized.

Fiscal Uncertainty despite Eurobonds

July 2019

Although the Legislative Assembly approved the issuance of $1.5 billion of debt in the international market, Fitch Ratings believes that in the coming years there could be renewed uncertainty about the sources of financing for the Costa Rican government.

For the qualifier, the uncertainty could resurface because the Treasury Department's initial plan was to issue $6 billion within six years, however, the Legislative Assembly Committee in charge of the file modified the text so that the limit would be $1.5 billion.

Costa Rica is Closer to Issuing Eurobonds

July 2019

The Legislative Assembly approved in first debate the issuance of $1.5 billion in debt securities in the international market, which in the opinion of the rating agencies, helps to reduce uncertainty about the government's ability to meet its financing needs.

The Treasury Department's initial plan was to issue $6 billion within six years, however, the committee in charge of the file modified the text so that the limit would be $1.5 billion.

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