Costa Rica’s congress refusal to debate the International Monetary Fund’s (IMF) $ 1.8 billion loan before June could hurt the country’s ratings, an expert said.
“In reality, the mission with the IMF is more of a good payment image effect [practices] vis-Ã -vis rating agencies making a commitment to repair public finances. This is not hell, this is the task Costa Rica must undertake with or without the IMF â. Daniel Suchar, professor of finance at Universidad Nacional de Costa Rica, told BNamericas.
However, the government considers the debate to be very important. “If we do not give stability to our economy, sorry for the colloquialism, everything will go to hell,” President Carlos Alvarado (photo) said as quoted by local media outlet Diario Extra.
âEvery delay in the agreement with the IMF creates noise and could deteriorate the image that Costa Rica already has in the risk assessment which is already at a ‘B-‘. It means almost two steps to becoming junk bonds, âSuchar said.
He added that a prolonged standoff between the government and Congress would hurt the country as investors lose confidence. Delaying the debate on the loan would also delay urgent public finance reform.
Congress will debate a global tax, the contribution of public enterprises to public funds and the taxation of teachers’ salaries, luxury houses and the lottery.
So far, only the debate on the framework law on public employment, which determines wages and benefits, has advanced.
“Public employment frame aims to normalize the distortions we see in public management. We hope it will result in savings of 1.2 to 1.8% of GDP once it is implemented, âSuchar said.
Critics fear job losses and pay cuts resulting from the reform, which has sparked protests across the country.
Photo credit: Government of Costa Rica