IMF urges fiscal reform in Costa Rica – La Prensa de Honduras

San Jose, Costa Rica

The International Monetary Fund (IMF) warned on Monday to Costa Rica on the need for a tax reform that mitigates the effect of a high deficit tax, which would reach 9% of gross domestic product (GDP) by the year 2021.

a mission of the organization headed by Lorenzo Figliouli, conducted a review of the Costa Rican economy between February 23 and this March 7 and concluded that a total of 3.75% of GDP fiscal adjustment required to stabilize the central government debt at a safe level.

“the current fiscal trends remain unsustainable long term. If not policy measures are taken, the central government deficit would exceed 9% of GDP and the debt would increase to almost 70% by 2021, “said Figliouli news conference.

the primary deficit of the central government of Costa Rica is the order of 3% of GDP, rising to nearly 6% when taking into account the payment of interest on the accumulated debt.

Figliouli explained that the government of President Luis Guillermo Solis has made significant to reduce spending, which would represent the end of his term (May 2018) 1.25% of GDP effort, but this is not enough.

“from a macroeconomic perspective, only one adjustment of the magnitude identified as necessary by the Mission and the authorities to stabilize public debt to GDP (3.75% of GDP) would be appropriate relationship, “said the IMF representative.

the Mission stressed the importance of the measures taken by the government to control inflation, which in 2015 was negative, at -0.8%.

According Figliouli, the country’s economic growth slightly exceed its potential level of 4% in 2016, thanks to factors such as economic recovery in the United States, encouraging economic activity through monetary policy, and the persistence of real credit growth.

the Vice President and Minister of Finance, Fallas Helio said that the IMF’s conclusions are consistent with what has been drawing the Government of the urgency of taking action to resolve the fiscal deficit and debt.

the administration has submitted to Congress a number of draft tax reform that would allow substantially reduce the deficit, but some sectors of the political opposition reject them.