IMF Agrees On $527 Million Financing To Costa Rica

  • A technical mission from the International Monetary Fund (IMF) agreed to disburse US$527Mn to Costa Rica after completing the fourth review of the authorities' reform programme, it said on Friday, April 28.
  • The agreement is subject to approval by the IMF Executive Board, contingent on the implementation of a prior action by the authorities linked to implementing the public employment law.
  • The implementation of the public employment bill seeks to create a single framework for employment in the public sector, with eight salary scales. This initiative will make the current fragmented public salary system more equitable and efficient by ensuring fiscal sustainability, improving the equity and efficiency of the public administration, and strengthening social safety nets and tax compliance.
  • The decision comes as Costa Rican authorities continued to move forward with their comprehensive economic reform programme, IMF said in a statement, adding the reforms aim to make the tax system more efficient and fairer, will strengthen social protections, and reduce labour market informality.
  • Additionally, the IMF also said that Costa Rican authorities were moving forward with an "ambitious agenda to green the economy". In other words, the Costa Rican authorities aim to transition to an urban green economy by decarbonising its Greater Metropolitan Area through sustainable integrated urban planning.
  • The country’s performance under the previous programme has been strong, and all quantitative targets have been met. There was broad agreement that the overall policy stance should remain focused on bringing inflation back to target (3% ± 1%) and keeping public debt on a firm downward path. This would help protect the poor (who are worst affected by high inflation) and could be achieved while still expanding targeted support for the most vulnerable.
  • The financial institution also said it sees Costa Rica's Gross Domestic Product (GDP) growth moderating to 3.0% in 2023, after growing 4.3% last year. Headline inflation has also been on a steady downward path and is projected to be within the Central Bank of Costa Rica (BCCR)’s tolerance range around the target later this year. 

(Sources: IMF & Yahoo Finance)