The government is preparing a bill for the Assembly to authorize a debt issue on the international market next year.
The Ministry of Finance is considering raising money abroad in order to avoid pushing interest rates up in the local market.If the Legislative Assembly approves the bill, the government will turn to the international market to raise the 1.2 trillion colones that it needs to pay for domestic debt securities due next year.
Fitch, Moody's and Standard & Poor's are once again warning of the need to generate more revenue and cut public spending in order to avoid "negative consequences for ratings."
On average agencies provide a period of 12-18 months for the fiscal deficit and public debt to stabilize, while clarifying that "... the presentation of tax reforms is not enough to ensure a good perspective for the country.
As part of a plan to reduce the fiscal deficit, the Finance Ministry is preparing a bill which aims to amend the existing tax exemptions scheme.
This project also seeks to create penalties for 1,259 misuse of tax breaks reported by the Technical Services Department up until 2014. It is anticipated that the initiative will be submitted to the Legislature in no more than two weeks.
While the budget increases, the Solis administration is requesting World Bank loans to cushion the public debt, transferring the weight of the expenses to future Costa Rican generations.
EDITORIAL
The Ministry of Finance has asked the multilateral technical assistance agency to analyze the country's debt policy and for an additional loan, the amount of which is still unknown, in order to pay part of the interest on the state's current debt.
Replacing Sales Tax with VAT, applying a system of global income and maintaining exemptions in free zones are part of the projects being prepared by the government.
With the three projects he plans to introduce in the Legislature, the Executive leader intends to increase total tax revenue to 2% of GDP in two years and completely eliminate the primary deficit, which at the end of 2013 was 2.8% of GDP.
The country ranks third in Latin America in terms of the difference between income and expenditure in relation to GDP.
In 2012, government revenues totaled 14.4% of GDP while expenditures were 18.8%.
Data from the Economic Commission for Latin America and the Caribbean (ECLAC), reveals that compared with 2007 figures the country shows a significant deterioration .
Costa Rica could have a greater fiscal deficit than the 4.8% estimated by the Central Bank for this year, reaching 5.1% of GDP.
According to the Fiscal Studies Program by the School of Economics at the National University of Costa Rica, this projection was based on total tax revenues increasing by 8.7%, taking into account a lower tax income and Customs taxes (due to a fall in imports) and also an increase in total expenditure of 11.5%.
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