Like lemmings running towards a cliff, Costa Rica repeats the kind of actions that underscore the definition of a society incapable of stopping on the road to a terminal crisis.
At the end of the first four months of the year, the Central Government's financial deficit reached 1.9% of GDP, explained by the almost 8% growth in accumulated expenses.
In a statement the Ministry of Finance reported that "... At the end of the first four months of the year, the Central Government's financial deficit reached ¢670,560.0 million, representing 1.9% of GDP, a percentage higher than that presented in the same period in 2017 (1.8%).In this period total accumulated revenues showed growth of 3.8% with respect to the same months in 2017, while accumulated expenses increased by 7.6%.
After recognizing the serious liquidity problems faced, the government has announced it will borrow another $1 billion for a hearty lunch that others will pay for tomorrow.
The $1 billion that the Central Bank of Costa Rica (BCCR) has been negotiating since May with the Latin American Reserve Fund (FLAR) to strengthen its reserves will arrive in October of this year, according to the BCCR authorities.
The 2017 budget drawn up by the government of Costa Rica is the result of an arithmetic exercise, where the political will of the Solis administration has barely reduced maintenance and has increased privileges in the dominant state corporations.
EDITORIAL
Scandalous could be the best word to describe the magnitude of the increase of 12% which the Solis Rivera administration has made in the 2017 public budget.The 12% increase not only far exceeds the projected inflation for this year, but is disproportionate and far from reality, considering the serious and urgent fiscal problem facing the country.
It has been pointed out that the solution to the financial debacle of the State of Costa Rica unavoidably involves rethinking the system of incentives and salaries of public officials.
Crhoy.com reports that "... economists and former ministers have said it's good that a containment of public expenditure be made, but if the current government and MPs really want to solve the budget deficit they must not stick only to the administrative unti but must also delve into the issue of public sector salaries."
The academic corporatism which has come to power in Costa Rica brings a "vision of the world of the Social Democrats of the sixties and seventies."
An analysis carried out by Juan Carlos Hidalgo on his blog on Elfinancierocr.com on the proposed Costa Rican state budget points to a decalogue of macroeconomic horrors that besides contradicting election promises on cost containment and austerity, show an outdated vision of the new government regarding the alleged benefits of increased public spending in the functioning of a modern economy.
If there are no reductions in state subsidies and wages no type of fiscal reform will allow the country to achieve sustainability.
Since 2013 and via an Article IV report for El Salvador, the International Monetary Fund (IMF) has been warning the government about the need to take action to moderate wages in the public sector and correct poorly targeted subsidies, establishing strict controls over costs, which for the current year increased by $281 million.
Though means of five rounds of talks Costa Rica's government is attempting to build a social pact that will enable solutions to be found to the plight of the state's finances.
An article in Elfinancierocr.com reviews the topics to be discussed dates of the meetings scheduled by the Ministry of Finance:
1 - Administrative and Legal Strengthening of Tax and Customs System, October 24.