IMF Staff Completes Virtual Visit to Costa Rica, Reaches Staff-Level Agreement
March 8, 2022
End-of-mission press releases include statements from IMF staff conveying preliminary findings after a visit to a country. The views expressed in this statement are those of IMF staff and do not necessarily represent the views of the IMF Executive Board. Based on the preliminary findings of this mission, staff will prepare a report which, subject to management approval, will be presented to the IMF Executive Board for discussion and decision.
- The IMF has reached a staff-level agreement with the Costa Rican authorities on the policy measures needed to complete the first and second reviews of Costa Rica’s IMF-supported program. The agreement is subject to IMF Executive Board approval.
- The authorities have made important progress under their program, notably with the approval of the draft law on public employment, to ensure fiscal sustainability, improve the equity and efficiency of public administration and strengthen social safety nets and tax compliance.
- Prudent fiscal policy and continued supply-side reforms will remain essential going forward to make the Costa Rican economy more resilient to shocks and to promote inclusive and sustained growth and job creation.
An International Monetary Fund (IMF) mission led by Ms. Manuela Goretti held virtual meetings with Costa Rican authorities from February 22 to March 3, 2022. The mission was a follow-up to discussions held in October 2021. At the end of virtual tour, Ms. Goretti released the following statement:
“The IMF team has reached a staff-level agreement with the Costa Rican authorities on the policy measures needed to complete the first and second reviews under the economic reform program supported by the three-year arrangement of the Extended Financing Facility (MEP) The IMF Executive Board is expected to consider the matter in the coming weeks.
“The authorities have made significant progress on their economic program. The end-December 2021 targets have been largely achieved. The Legislative Assembly has approved the Public Employment Bill, which represents an important step forward in improving the fairness and efficiency of public administration. Significant steps have also been taken to strengthen social safety nets and improve tax compliance.
“A proactive response to the pandemic, including a vigorous vaccination campaign, and sustained export performance have underpinned a robust recovery in Costa Rica. Nonetheless, the threat of new variants of COVID along with rising global commodity prices and tighter global financial conditions, including due to rising geopolitical tensions, pose downside risks to Costa’s economic outlook. Ric.
“The fiscal position has been strengthened by revenue mobilization efforts, improved tax administration and prudent spending under the fiscal rule, although more resources have been allocated to support vulnerable people and respond to to the pandemic. Nevertheless, further efforts are needed to improve the tax system to make it fairer, supporting a balanced reduction in the fiscal deficit and ensuring a more sustainable path for public debt over the medium term.
“The ongoing withdrawal of the Central Bank of Costa Rica (BCCR) from monetary easing is warranted given rising inflation and inflationary risks. In the current uncertain external environment, the BCCR’s data-driven and forward-looking approach to monetary policy, focused on ensuring low and stable inflation as a primary objective, will be even more critical. Continued clear and transparent communication and exchange rate flexibility will support these efforts. Ongoing measures to improve the central bank law will further emphasize the operational autonomy and governance of the BCCR.
“The financial system has shown resilience throughout the pandemic thanks to supportive monetary policy as well as a proactive approach to monitoring risk, conducting stress tests and updating recovery plans. ’emergency. The Basel III requirements are systematically staggered, giving banks enough time to adapt to the new regime. Further efforts to improve the crisis management framework and encourage dedollarization will further benefit the financial system.
“The pandemic has brought issues of inequality to the fore. Ongoing efforts to support the most vulnerable, encourage formal employment, pursue women’s economic empowerment, increase digitalization and transition to a low-carbon economic model will be key to achieving an inclusive and green economy that creates high quality jobs for all Costa Ricans.
“The IMF team is grateful to the Costa Rican authorities and other interlocutors for the frank and constructive discussions.”
IMF Communications Department
PRESS OFFICER: Randa Elnagar
Call: +1 202 623-7100E-mail: [email protected]