The Alvarado administration presented to the Legislative Assembly the draft public budget for 2020, which will be 4.3% lower than 2019, thus representing the largest spending reduction in recent years.
A decrease in current spending, as well as a decrease in public sector institution positions and salaries, allowed the central government budget for 2020 to be lower than this year's, the Assembly reported.
After a long and tense wait, the Constitutional Chamber granted the approval for the Law to Strengthen Public Finances to be voted in Congress with a simple majority.
The Court's judgment prepares the way for the law to advance more quickly in the coming weeks in the Congress. Now legislators will be able to vote their approval in the second debate, ending a long period of uncertainty, which led to a significant depreciation of the Colon against the dollar, a rise in interest rates and a general concern about the economic future in the short term.
The 8% growth in total government revenue was not enough to reduce the financial deficit, which at the same period reached 1% of GDP.
From a statement issued by the Ministry of Finance in Costa Rica:
By February 2016, the increase in expense figures was lower than those shown in the growth of tax revenues. This was announced by the Ministry of Finance, when it released the fiscal results at the end of the second month of this year, when expenses grew by 7.8% and total revenue increased by 8.2% with respect to the previous year.
The market was declared dead several years ago, but the government of Costa Rica has been keeping it alive artificially at the expense of taxpayers purses.
Editorial
Radiographic Costarricense (RACSA), is a subsidiary of the state-owned Instituto Costarricense de Electricidad (ICE), the major player in the telecommunications industry in Costa Rica, even after the market opened in 2010.
"There are many ways to define populism, but perhaps the most accurate is that it is a form of social and economic demagogy that sacrifices the future of a country for a fleeting present" - Mario Vargas Llosa
Editorial
In fits and starts, the president of the Legislative Assembly of Costa Rica has approved the state budget for 2015, after a majority of legislators voted against it, in an arbitrary exercise supposedly covered in a legal vacuum on the subject. Previously, the Assembly had rejected three different motions containing spending cuts in the budget, including one generated from the very same Ministry.
Moody's has removed the country's rating of "investment grade", citing the increase in public spending and political inability to implement fiscal reform.
From a statement by Moody's:
New York, September 16, 2014 -- Moody's Investors Service has today downgraded Costa Rica's government bond rating to Ba1 from Baa3. Moody's has also changed the outlook to stable from negative.
Facing a serious and growing fiscal deficit, the Solís administration has presented the 2015 spending plan for the central government which is 19% higher than that of 2014.
Even though the fiscal deficit up to July is already located at 3% of GDP, the government has decided to increase the state budget for 2015 by 19%, which added to the 4% increase approved for public wages and 14% increase in the resources paid to state universities, threatens to push up interest rates and further complicate the economic scenario.
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