An immediate fiscal adjustment is needed in order to avoid the risk of a possible closure of credit to the country in the international market, which would force an abrupt adjustment.
The warning from the head of the mission at the International Monetary Fund (IMF), Lorenzo Figliuoli, has its origin in the government’s fiscal deficit, which this year will reach 5.9% of GDP, while increasing public sector debt reaches 60.4% of production.
An article on Prensa.com reports that “… Figliuoli explained that when the deficit is so large and public debt compared to production grows so fast and exceeds levels of 40% or 50%, the risks for the economy increase . ”
To the question – “What is the danger of not making a fiscal adjustment,” the IMF chief said “… that markets could close and force a disorderly adjustment to be made, very abruptly and urgently … Under these conditions, fiscal adjustment is not well designed, is not done gradually and would have a negative impact on the economy and, especially in the weaker sectors of society, those who can least defend themselves when things go bad”.
The current government of Costa Rica has a very difficult political environment in which to achieve the adoption of new tax laws to help improve tax revenue, and shows little willingness to reduce state spending, which is growing continuously, especially in salaries paid to staff.
The US deficit is about 74% of GDP and that is not an issue while in Costa Rica 5.9% is a major issue and the public debt in the US is over 100% of GDP. So Costa Rica is way more stable than the US by these measure yet it is a major issue for them. Does the IMF not look at the US. Oh but wait the IMF is owned by the US. That may explain things.
Another great country being ruined by populist left wing gov’t policies. Add Costa Rica to the list with Argentina, Venezuela, Greece, etc.