The institution is once again emphasizing more efficient public spending and making cuts before a fiscal adjustment comes into force, in a form that is "draconian and with emergency measures".
Making cuts and improving efficiency in public spending is once again the main recommendation of the International Monetary Fund. In education alone, an area into which almost 8% of GDP goes, there is ample room for improvement. Figliuoli Lorenzo, head of the mission that visited the country said at a news conference that in this category "... better results are obtained in countries where less than half this amount is spent, such as Chile, or much less than countries that spend the same as Costa Rica, like Finland ".
The organization has once again supported the initiative that the Costa Rican government has control over the register of shareholders of companies classified as large taxpayers.
"The state must have in its hands information on the shareholders of companies and where dividends go to. In a democracy like this it is very difficult to understand how, who and why people can oppose the state having that information, " said the secretary general of the Organisation for Economic Co-operation and Development (OECD) Angel Gurria to Nacion.com.
An announcement from Moody's confirms the limited room for maneuver left to the country when obtaining external financing, compromising access to credit for the private sector.
Costa Rica has received a new warning over a possible lack of access to funds in the international market with which to alleviate its growing fiscal deficit. After China's decision not to buy $1 billion in bonds , the rating agency Moody's anticipates a rise in interest rates in the country and a deterioration of credit and growth.
The interest paid by the government for debts incurred grew by 14% over last year, meaning that they went from representing 2.6% of GDP to 2.8% of GDP.
Although for the first time in four years total revenue grew more than total expenditures, this increase is still insufficient to cope with the growing fiscal deficit, which at the end of the year stood at 5.9% of production.
The Chinese government has announced that it will not buy bonds worth $1 billion offered by Costa Rica, seriously delimiting the leeway that the Solis administration has to manage its growing fiscal deficit.
The lack of political conditions to implement greater controls on government spending and to gain approval for a fiscal package which would tidy up state finances is preventing multilateral lenders such as the World Bank or the IMF from lending money to Costa Rica, meaning that, after the elimination of the option to sell bonds to the Chinese government, Costa Rica will have to resort to the domestic market for funds, which will inevitably push up the cost of money for all sectors, including production.
While the Northern Triangle countries strive to reduce or at least maintain constant levels of debt / GDP, Costa Rica and Panama move further away from fiscal discipline, the former at the greatest pace.
From the introduction of a report entitled "Macrofiscal Profiles : 4th Edition." by the Central American Institute for Fiscal Studies (Icefi):
State expenditures continue to exceed tax revenues while the government cries out for legislative approval of the proposed tax reform.
In October, total revenues amounted to ¢3,241,326 million ($6,047 million), recording a variation of 8.5%, while total expenditures reached ¢4,589,189 million ($8.561 billion), growing 9.6% compared to the same period in 2014.
An immediate fiscal adjustment is needed in order to avoid the risk of a possible closure of credit to the country in the international market, which would force an abrupt adjustment.
The warning from the head of the mission at the International Monetary Fund (IMF), Lorenzo Figliuoli, has its origin in the government's fiscal deficit, which this year will reach 5.9% of GDP, while increasing public sector debt reaches 60.4% of production.
Very dark is the future of a country where the rulers do not lift their gaze beyond the few years of the mandate conferred on them by citizens.
EDITORIAL
The president of Costa Rica prefers short-term actions to address the fiscal crisis, while leaving open the tap of privileged public wages by which the future of the nation drowns through.
"The ongoing economic recovery in the United States and persistence of relatively low oil prices will provide favorable tailwinds to the region.Because of supply constraints, the region is expected to maintain a moderate pace of growth in coming years."
From the press release by IMF:
Central bank governors, finance ministers, and banking superintendents of Central America, Panama, and the Dominican Republic, and senior IMF officials met in El Salvador on July 23-24 to review the economic outlook for the region and strategies to strengthen policy frameworks and raise inclusive growth. The regional conference saw the participation of the President of El Salvador, Salvador Sánchez-Cerén; Governor of the Bank of México, Agustín Carstens; Director of the Netherlands Bureau of Economic Policy Analysis, Laura van Geest; and former Finance Minister of Perú, Luis Carranza.
In the latest update to its emerging market index the entity changed its view of the relative weight of Costa Rican bonds from "Marketweight" to "Underweight".
An article in Elfinancierocr.com notes that "... The opinion of JP Morgan in making this move is centered around the fiscal deterioration suffered by Costa Rica and they argue that this has been sustained and that there is little chance that this trend will be reversed. Moreover, the document says, the fiscal deficit continues to grow and even increased during the first quarter of 2015. "
A bill to improve the fight against tax fraud authorizes the tax authorities to seize the assets and bank accounts of delinquent taxpayers, without a warrant from a judge.
An article in Nacion.com reports that the Technical Services Department of the Legislative Assembly has proposed a rule that "... could affect property rights and the privacy of individuals because it would allow Taxation officials to take possession of any money deposited in bank accounts, income from salaries and pensions. " and all this "... without a warrant, the Tax Administration would be able to seize assets and enter business establishments."
After the optimism over the lukewarm reduction in the continuous increases in the primary deficit of the government of Costa Rica, comes the harsh reality of the growing amounts for interest payments on the debt, which continues to increase.
"Fiscal accounts for 2015 anticipate an additional burden of concerns about the sustainability of the public finances of the governments of the region."
From a report entitled "Macrofiscal Profiles: 3rd Edition" by the Central American Institute for Fiscal Studies (Icefi):
The close of fiscal year 2014 has left more uncertainties than certainties in the current panorama for Central America. Fiscal accounts for 2015 anticipate an additional burden of concerns about the sustainability of the public finances of the governments in the region: low tax revenue growth; public expenditure which is anchored to the possibilities of indebtedness; public debt continues which to accrue.
The constant increase in Costa Rica's public debt seems unstoppable, which could generate "a sudden change in investor confidence" and force "a messy macroeconomic adjustment".
Even if in the coming months they manage to secure parliamentary approval for tax measures currently requested by the government, public debt will continue to increase and in 2019 will represent over 50% of GDP. If this approval is not given, this percentage will exceed 60%.
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