Costa Rica Leader Declares an End to Years of Reckless Deficits

• Costa Rica’s days of living beyond its means and running up reckless amounts of debt are over, said the nation’s president, whose fiscal turnaround is winning over currency and bond traders.
• “There’s a new sheriff in town,” President Rodrigo Chaves said Monday in an interview in the presidential palace. “Our country isn’t going to take on excessive amounts of debt with irresponsible deficits, as it did for the last 40 years.”
• After nearly a decade of repeated credit rating downgrades and a near-financial crisis in 2018, the nation dramatically reversed course over the last two years; and slashed the deficit under an International Monetary Fund Fund programme.
• The government posted a primary surplus of 2.3% of GDP last year, above its programme target of 1%, and the IMF said the government is on track to exceed this year’s targets too as the government has space to modify its fiscal rule.
• Notably, Fitch Ratings (BB-; Stable) and S&P Global Ratings (B+; Stable) both upgraded Costa Rica this year as the country outperformed its targets under the IMF programme.
• Additionally, Costa Rica’s currency has appreciated 15% since its congress approved the IMF deal in 2021, making it the best performer in the Americas. The nation’s dollar bonds are also among the world’s top performers over that period.

(Source: Bloomberg)