The Government announced the Plan to overcome the fiscal impact of the pandemic, a proposal to negotiate an agreement with the International Monetary Fund (IMF) to obtain financing of $ 1.75 billion.
As in other countries, Costa Rica has seen a contraction and a fall in economic activity due to the pandemic. The strong impact on national production, the decrease in State income and the increase in investments and expenses to attend the health emergency not only halt the improvement of the public finances in which they worked, but also aggravated the fiscal imbalance.
Against this background, the proposal details measures such as reducing the cost of social security contributions for companies by at least 5 percentage points over four years. This action will reduce hiring costs and stimulate employment. In addition, it will not affect the finances of the Costa Rican Social Security Fund, which will always receive the resources, financed with 1% of GDP from the collection of the financial transaction tax.
Likewise, public debt will be reduced by 6 percentage points of GDP in order to change the cycle of indebtedness and the enormous payment of interest that the country has had in recent decades.
Four other measures to promote employment and economic growth are the reduction of electricity costs, reforms for the promotion and creation of employment, the Digital Resources Program at the service of the Educational Community and the plan of public-private alliances for the public investment.
It is also expected that the VAT refund of the basic food basket to the poorest 20% of the Costa Rican population, with which they will have more money available to meet their needs.
“Costa Rica throughout its history has been an example of various achievements, especially those associated with health programs, education, a healthy environment for investments, and pensions and solidarity insurance. However, the effects of the health crisis have generated an unprecedented economic impact, it is for this reason that we have set out to build a proposal to achieve a reasonable agreement, which includes a significant decrease in spending and an increase in income, which allow us to make an adjustment for the benefit of families and to guarantee the continuity of a State at the service of the Costa Rican population, ”said Elián Villegas, Minister of Finance.
For his part, Rodrigo Cubero, president of the Central Bank of Costa Rica, stated: “The COVID-19 pandemic has strongly impacted the Costa Rican economy in recent months. It has also severely hit public finances, and therefore it is necessary to undertake a fiscal consolidation in addition to that of December 2018. The country faces a historic moment and we have the responsibility to promote this fiscal adjustment to ensure macroeconomic stability and promote reactivation. and the well-being of Costa Rican families. Making this adjustment within the framework of an agreement with the IMF for three years is our best option, as it would give access to resources in better conditions and would provide a seal of confidence in the country’s economic policies ”.