At the height of the pandemic and economic crisis, the Costa Rican president announced, on a national chain, an economic recovery plan with no clear direction, no assigned leaders and no concrete actions.
In the message broadcast on the night of July 12, President Carlos Alvarado vaguely explained part of the plan to be adopted to overcome the health and economic crisis generated by the spread of covid-19.
The fiscal deficit of 2.3% proposed for the 2014 budget would cause such an increase in the Guatemalan public that could put monetary policy at risk.
In 2014 Guatemala's public debt will increase and it will be approximately $14.670 billion, equivalent to 25.5% of the country's GDP, explained Edgar Barquín, president of the Bank of Guatemala.
Authorities warn that the next administration will inherit a deficit of such a magnitude that it will require high impact decisions.
This was explained by the comptroller Marta Acosta during a session of the Costa Rican Congress where she presented a report on the budget plan for the Republic in 2014. In regards to the "high-impact decisions," she said that public revenue must be increased by $1.798 billion , equivalent to 3.4% of GDP.
The gap between government revenues and expenditures has increased to represent 3.4% of the country's production, up from 2.9% in August 2012.
This was announced by the chief of Finance, Edgar Ayales. "The accelerated pace of deficit growth is due both to the growth of government expenditure as well as revenue hit by the slowdown in the economy," noted an article in Elfinancierocr.com.
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 .
In the first six months of 2013 the Salvadoran government's debt rose by $296.1 million with the country risk increasing 104 basis points.
Estimates by the Central Reserve Bank (BCR), reveal that when comparing June 2013 ($14.5469 billion) to June 2012, state commitments increased by $1.2799 billion, as in June last year $13.267 billion was reported.
In light of the downward revision of the forecast for economic growth by the Central Bank, the UCCAEP has reiterated its concern over the high fiscal deficit.
From a statement from the Costa Rican Union of Chambers and Associations of Private Enterprises (UCCAEP):
In relation to the review of the macroeconomic program by the Central Bank of Costa Rica (BCCR) released today UCCAEP states that:
During the first six months of 2013, the Central Government's financial deficit reached $1.154 billion, equivalent to 2.3% of GDP.
From a press release by the Ministry of Finance of Costa Rica:
In June, 2013, primary expenditure, ie total expenditure excluding interest, grew by 8.8%, significantly less than the 11.2% recorded last year. The main elements which contributed to this slowdown were continued control of payroll spending and a slow down on the part of current transfers.
The third tax bill is now ready; it will tax bank transfers, luxury homes, as well as products used by printing companies.
The Ministry of Finance has not yet said when it will send the plan, which expects to increase revenuea by about $100 million, to the Legislature. According to the chief of Finance, Carlos Caceres, "we are working on the project which will, by 2020, return us to the same pre-crisis debt levels (before 2008).
While up to May Finance revenue grew by 10% interannually, Central Government expenditure increased by 13.1%.
"Finance revenue grew by 10% interannually up to May, driven especially by the collection of income tax, tributes which recorded a growth of 11.7% in May," noted an article in Elfinancierocr.com.
"This increase in revenue pales in comparison to the rise of 13.1% in central government spending."
All quantitative performance criteria corresponding to the end of December 2009 and end of June 2010 have been met were exceeded.
A statement from the International Monetary Fund (IMF) reads:
The IMF Executive Board has concluded its fourth and the fifth review under the Extended Credit Facility for Nicaragua and approved an extension of the agreement
The Costa Rican government’s spending is excessive, especially its payroll, this is limiting the country’s competitiveness, and preventing the development of productive enterprises.
From a press release of the Costa Rican Chamber of Commerce:
Excessive public spending limits business development
• Current expenditure absorbs much of the available resources, limiting the possibility of increasing investment, say businessmen.
The Salvadoran Foundation Fusades has warned that if tax reforms are not accompanied by cuts in public spending they will have a negative impact on employment and investment.
A press release from the Salvadoran Foundation for Economic and Social Development reads:
The fiscal situation is critical and unsustainable. From 2007 to 2011 the total public debt rose from 43% to 56% of GDP, spending grew due to widespread increases in benefits and wages, while investment declined. The path to correct the fiscal situation was detailed in the "Stand-By Agreement" between the Government and the International Monetary Fund (IMF) in 2010, which the country must comply with.
As unemployment rises and poverty increases, the Costa Rican Minister of Finance has declared "urgent" the payment of bonuses to central government officials.
EDITORIAL OPINION
If you are an official in the central government of Costa Rica, your bonus this December will average 15.6% higher than 2010. But if you are poor, and most likely also unemployed, the only thing that will increase is the number of your neighbors in the same situation.
Costa Rica forecasts a 10% deficit in 2016 - more than $ 4.000 million – if the current trend continues without a reform.
As noted by Aldesa, the central government deficit amounted to almost $ 1.970 million. The shortfall means 5.3% of the national GDP and a growth of 73% over the total deficit of 2009, according to preliminary data from the Ministry of Finance.
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