SAN JOSE, (Reuters) – Costa Rica’s government has reached a deal with an International Monetary Fund (IMF) technical mission over the policies that will serve as the basis for a $1.75 billion loan from the fund to the Central American country, the IMF said on Friday.
Manuela Goretti, head of the IMF mission, said the two sides had agreed at staff level on economic and structural policies that would underpin a three-year agreement for the loan, which still needs approving by the IMF management and executive board.
The accord, which comes after protests derailed a previous attempt by the government to secure an IMF loan last year, must also still be ratified by Costa Rica’s National Assembly.
Later, the government said the measures agreed would amount to fiscal adjustments worth 4.74% of gross domestic product (GDP) through 2025, of which three-quarters would be spending cuts and the rest tax increases.
In a statement, Goretti said Costa Rica’s efforts will be based firstly on “equitable fiscal reforms to ensure debt sustainability, while protecting the poor and most vulnerable.”
Costa Rica would also uphold monetary and financial stability, while strengthening the central bank’s autonomy and governance and addressing structural financial vulnerabilities.
Additionally, the government would push structural reforms to support labor market inclusion, while boosting productivity under its commitment to combating climate change, Goretti said.
The government is taking measures to achieve a primary budget surplus of 1 percent of gross domestic product by 2023 and to get public debt on a downward path, the IMF noted.
Fiscal consolidation will be driven by “a balanced mix of expenditure rationalization … and equitable revenue mobilization,” Goretti said, without giving more details.
Costa Rica has been struggling to get its finances under control, and ended 2020 with a budget deficit of 8.34% of GDP, according to official estimates.
