The high level of financing and the economic slowdown explain the increase in the fiscal deficit of the central government, which at the end of July reached 3.3% of GDP, the highest in the last six years.
The decrease in tax revenues, due to a slowdown in economic activity, added to the high level of government debt, explained the strong rebound in the fiscal deficit in the first half of the year.Of the total deficit, about two thirds correspond to interest.
In Costa Rica the 1.7% increase in revenues accumulated up to May was not enough to offset the 8% increase in total expenses.
From a statement issued by the Ministry of Finance:
June 21, 2018.The growth of 1.7% in total income accumulated up to May 2018, is insufficient to offset the variation of 8.1% of total expenses, 48% of which is due to the increase in interest.This behavior generated a primary deficit (difference between current income and total expenditure excluding amortization and interest) in the central government of 1.2% of GDP and a financial deficit of 2.6% of GDP, exceeding the figures observed in the same period in 2017 (1% and 2.2% respectively).
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%.
The entity recognizes the continued economic recovery, but warns that potential growth is below the desirable level, debt remains high, and wide financing gaps are projected for 2019 and in the future.
From a statement issued by the IMF:
On May 11, 2018, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with El Salvador.
This year it is projected that growth in the Honduran economy will moderate to 3.7%, partly influenced by political uncertainty and less favorable external conditions.
From a statement issued by the IMF:
An International Monetary Fund (IMF) mission, led by Roberto Garcia-Saltos, visited Tegucigalpa during April 3-12 to conduct the 2018 Article IV consultation.
The institution highlights the progress that has been made in reducing the fiscal deficit and stabilizing the debt, but warns that a greater effort is needed to place the debt on a downward trajectory.
From a statement issued by the International Monetary Fund:
The IMF staff team visited San Salvador during February 5—16 for the 2018 Article IV consultation [1] and held productive discussions with the Salvadoran authorities, parliamentarians, business community, and social partners. The consultation was based on revised National Accounts statistics.
Lack of fiscal reform continues to erode Costa Rica's public finances, constraining its long-term growth prospects and highlighting its vulnerability to external shocks.
At the end of the first month of the year, total expenses grew by 7.8%, while tax revenues increased by almost 9%.
From a statement issued by the Ministry of Finance:
At the end of the first month of 2018, the deficit was 0.6% of production and the primary deficit (income and interest-free expenditure) stood at 0.4% of GDP.
Between today and February 14 the Ministry of Finance in Costa Rica will go to the local market with the goal of issuing $290 million, at a rate of 7% and maturing in 2019.
In its constant search for fresh resources to meet the interest payments on its growing debt as well as its current expenses, during the next few days the Ministry of Finance will return to the market to try to raise $290 million, through the issue of government debt bonds.
Last year, the Central Government's current expenditures amounted to $6.712 billion, 8.5% more than in 2016, while capital expenditures totaled $3.730 billion, or 6.4% of GDP.
From a statement issued by the Ministry of Finance:
As of December 2017, the total revenues of the Central Government (CG) were B /.
Facing a second round of elections scheduled for April 1, private sector unions are calling on the two candidates to present their economic proposals for reducing the uncertainty that currently weighs heavily on the business climate.
A solution to the fiscal problem, and options for reducing the cost of energy and other production costs that are affecting the country's competitiveness is what Costa Rican businessmen are asking of the candidates who will face a second round of elections on April 1.
Fitch Ratings has changed the outlook from stable to negative, due to "diminished flexibility to finance its rising budget deficits and public debt burden, as well as persistent institutional gridlock preventing progress on reforms to correct the fiscal imbalance."
EDITORIAL
Costa Rica is running out of time.The decision taken by Fitch Ratings to reduce from the outlook for the sovereign debt rating from stable to negative reflects a serious problem that the country faces and shows us that, in the not very long term, the rating agency could lower this rating, currently in the BB category.
The difficulties the government faces while trying to solve the serious fiscal problem that affects Costa Rica is already generating strong upward pressure on interest rates, both in local currency and in dollars.
EDITORIAL
If a private company faces liquidity problems for several months, does it borrow every month to pay salaries and other current expenses?The answer is no. It adjusts its operating expenses, reduces its return and tries to operate as efficiently as possible, trying to generate the highest income with the lowest possible expense structure.
Up to November 2017, the accumulated interest balance reached 2.8% of GDP, compared to 2.4% of GDP the same time last year.
From a statement issued by the Ministry of Finance:
Interest continues to rise and has become the main item that is putting pressure on the fiscal deficit.As of November 2016, the accumulated balance of interest amounted to 2.4% of GDP, while in the same month of this year, the sum reached 2.8% of GDP. This directly affects the financial deficit, which went from 4.7% in November 2016 to 5% in November 2017.A smaller increase was observed in the primary deficit, which excludes interest, which went from 2.0% to 2.2% in the same period.
In Nicaragua, the Ortega administration has authorized raising the maximum limit allowed for the central government's debt to $1.170 billion.
Through a decree published in the official newspaper, La Gaceta, the Executive Power has authorized raising the maximum limit of debt that the central government can take on by $60 million.
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