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.
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. "
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.
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.
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%.
The Finance Minister himself described the Costa Rican financial situation as "fragile and unsustainable" .
An editorial in Elfinancierocr.com notes that "In the next few months Ayales's management in light of public finances will be very difficult for four reasons."
Among these reasons is the electoral political situation, which ensures an increase in public spending because of the need to complete at least some projects before the end of the current term, and especially because of the actions of pressure groups demanding government concessions.
The Central American Institute for Fiscal Studies has highlighted the unsustainability of the fiscal deficit in Costa Rica, El Salvador, Guatemala and Honduras.
Pensalibre.com reports that "... according to the results of a report by the Central Institute for Fiscal Studies (Icefi) submitted yesterday ... Guatemala, El Salvador, Honduras and Costa Rica find themselves with in unsustainable scenarios regarding public debt in the next few years. "
In November, the balance between government revenues and expenditures showed a deficit equivalent to 4% of GDP.
In November the government deficit amounted to $ 1.82 billion, or 4% of the gross domestic product (GDP), the same level as in 2010. Nevertheless, in 2010 the shortfall was lower, at $ 1.52 billion. Of the $1.82 billion shortage the government needs to cover its running costs, $1.12 billion were financed with domestic debt and $700 million with external debt.
Congress has given final approval to the Costa Rica the government for the 2013 budget of $12.908 billion, 7.7% higher than in 2012 and a deficit of 45%, which will be financed with debt.
A statement from the Legislature reads:
The Legislative Assembly also passed with 27 votes from the 46 deputies present in the second debate the regular budget for next year, in archive number 18,554, which is around 6.4 billion colones of which 57% will be financed by fresh income and 43% with debt .
The 10% increase in revenues will offset the 9.5% increase in central government spending, leaving the fiscal deficit at 3.5% of GDP, slightly below the October 2012 cumulative.
A statement from the Ministry of Finance reads:
Government deficit to October is slightly lower than in the same period last year
• Net domestic financing of the government (including recourse to external debt amortization) was 4.2% of GDP, down from 4.3% in the same period of 2011
The increase in government spending in the first eight months of 2012 is even higher than the increase observed in the same period last year.
A statement from the Ministry of Finance reads:
• Deficit continues to grow despite efforts to control spending and reduce evasion
• Efforts to improve finance and control collections are strengthened
Tax revenues in the first eight months of the year reveal more dynamism in 2012 than last year.
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