Fiscal Crisis: Less Spending and More Information

Given the agreement reached by the Alvarado administration and the IMF for Costa Rica to access a $1.75 billion loan, the business sector is calling for a reduction in public spending and for detailed information on the scope of the agreement signed by both parties.

Monday, January 25, 2021

In an attempt to ease the fiscal and economic crisis the country is going through, last year the Alvarado administration began negotiations to access a loan for $1.75 billion to be requested from the International Monetary Fund (IMF).

Initially the proposal was not well accepted and in mid-November the country was at a standstill due to violent blockades by opponents of the project on different highways. At that time the authorities decided to withdraw the original plan and called for a national and multisectoral dialogue.

After the national dialogue was exhausted, the Costa Rican government sat down to negotiate with the IMF the conditions to access the multi-million-dollar loan.

According to an IMF statement dated January 22, 2021, the IMF mission and the Costa Rican government reached a staff-level agreement on a three-year program to anchor the government's policy and reform efforts to strengthen the country's response to the pandemic and lay the groundwork for a strong and lasting economic recovery.

The main policy measures under the country's IMF-supported program will focus on ensuring fiscal sustainability and promoting monetary and financial stability, while protecting the poor and most vulnerable sectors, the IMF document notes.

In this context, Fabio Masis, executive director of the Costa Rican Union of Chambers (Uccaep), told that "... From the business sector we consider, of greater urgency, to know the structural measures that the Executive has announced and that, for the sake of transparency, should be informed."

Masis explained that the "... Uccaep will be 'vigilant' of the compliance with the agreements established in the dialogue processes promoted by the Government and where different sectors participated. Measures such as reduction of public spending, adherence to the fiscal rule and reduction of transfers are commitments that are on the right track and that even from now on should be the norm and not the exception." See full article in El Observador.

Now the agreement signed between the technical staff of the Alvarado administration and the IMF must be endorsed by the board of directors of the financial organization and by the Legislative Assembly of Costa Rica.

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