In this regional context of economic crisis, falling fiscal revenues and increasing public debt, Costa Rica's debt level is expected to rise to 75% of GDP by 2021, and in the case of El Salvador, the indicator could exceed 85%.
The outbreak of covid-19 in Central America forced the government to declare severe household quarantines and to restrict several economic activities, restrictions that in some cases are still in place after five months of health and economic crisis.
Total revenues from the central government grew by 2% compared to the same period in 2016, while total expenditures fell by 2.1%.
From a statement issued by the Ministry of Economy and Finance:
Total revenues of the Central Government for the first half of the year amounted to B/3,537 million, that is to say they increased by B/.64 million or 1.9% with respect to the same period in the previous year, explained the Minister Of Economics and Finance, Dulcidio De La Guardia today in press conference.
In comparison to 2015 revenue grew by 9% and expenses by 6%, and total public debt as a proportion of GDP reached 45%.
From a statement issued by the Ministry of Finance:
The figures for income and expenditure of the central government indicate that by the end 2016,the shortfall of government revenue to cover expenses was 5.2% of GDP, less than the 6% calculated at the beginning of the year and less than the amount that was observed in 2015 (5.7%). This result represents a reduction of 2% (equivalent to ¢32 billion) from the deficit of 2015, which makes it the lowest deficit in the last four years.
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.
"In Costa Rica civil servants earn the most out of all Latin American countries, which is disproportionate to the economic and fiscal reality of the country."
An increase in resources for debt repayment, education and pensions account for the 12% increase in the 2017 budget compared to the 2016 budget.
According to a statement by the Ministry of Finance,"... the Bill for Fiscal Year 2017 is in the amount of ¢8.9 billion and is 12.1% higher than in 2016 ... due mainly to an increase in the debt settlement, resources for education and for the Ministry of Public Works and Transport. "
The amount of public investment to be made in 2017 has been estimated at $1.8 billion, equivalent to 19% of the total budget projected by the Executive Branch.
From a statement issued by the Ministry of Finance:
The Ministry of Finance (Minfin) has presented the project for the General Budget of Revenues and Expenditures for 2017,which amounts to Q79,830 million, which represents an increase of Q9,033.8 million compared to the amount approved in 2016.
Between 2018 and 2047 APM Terminals will pay approximately $1 billion for the concession of the new Moin Container Terminal which is currently under construction.
An article in Nacion.com reports that "... The data comes from a study by the Academy of Central America -a nonprofit private research center, founded in 1969-, carried out for the Dutch giant APM Terminals ".
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.
With an adjustment permitted by law the fiscal deficit of the nonfinancial public sector totaled $1,034,000 at the end of 2015, equivalent to 2% of GDP.
Prensa.com reports that "...The total balance of the year showed a larger deficit of $1.460 billion (2.8% of GDP), but the government turned to a possible mechanism in the law which has to do with the absence of contributions to the Savings Fund of Panama in order to adjust the deficit to 2%, the limit set by the Social Fiscal Responsibility Law for the last year. "
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):
In the area of prioritizing economic stability over the availability of resources to finance development, the countries of the northern triangle in Central America, have generally shown a significant effort to reduce or at least maintain constant levels are Debt / GDP and the fiscal deficit, which means that, tacitly, the fiscal rule of zero growth of public debt is being used, despite the impact this may have on the welfare of the people.
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.
The president of the Bank of Guatemala has stated that in order to sustain the fiscal debt, the tax burden in the Guatemalan economy will have to rise from 11% today to 14%.
An article on Lahora.com.gt reports that, Edgar Barquín president of the Bank of Guatemala, said "... in order to maintain economic stability and ensure social spending for the benefit of the population, the level of taxes needs to rise to 14 percent of GDP this year.
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.
The Government is still unable to curb its current account spending, which in 2013 grew by 8% compared to 2012.
Last year, the Salvadoran government used $3,654 million for consumption and operating expenses, $281 million more than in 2012, according to data from Banco Central de Reserva .
"Of the composition of current expenditure in 2013, 37.9% was needed for the payment of public employees, the purchase of goods and services accounted for 17.2% and commitments to public debt accounted for 15.9% of the spending."
In January 2014, current account expenditure increased by almost 8% compared to January 2013, with the category of Remuneration up 11%.
The monthly figures from the Central Government Revenues, Expenditures and Financing report published by the Ministry of Finance of Costa Rica, shows that the increase in total revenues in January 2014 was almost 11%, which meant a reduction in the fiscal deficit financial compared to GDP of 0.7%.
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