IMF Executive Board Concludes the Third Review of Costa Rica’s Extended Fund Facility and Approves the Request for the Resilience and Sustainability Facility
IMF News, November 14, 2022
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- IMF Executive Board Concludes the Third Review of Costa Rica’s Extended Fund Facility and Approves the Request for the Resilience and Sustainability Facility
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- Published: November 14, 2022
Board Decisions and Financing
- The Executive Board concluded the third review under Costa Rica’s Extended Fund Facility (EFF), allowing for an immediate disbursement equivalent to about US$ 270 million.
- Completion of the review makes available SDR 206.23 million (about US$ 270 million), bringing total disbursements under the arrangement to SDR 618.8 million (about US$ 810 million).
- The Executive Board approved Costa Rica’s request for an arrangement under the Resilience and Sustainability Facility (RSF) for SDR 554.1 million (about US$ 725 million or 150 percent of quota).
- Costa Rica is the first country to access the RSF.
- The RSF duration will coincide with the period remaining under the EFF; disbursements under the RSF are contingent on the conclusion of relevant reviews under the EFF and implementation of scheduled reform measures.
- Costa Rica’s three-year EFF arrangement was approved on March 1, 2021 in the amount of SDR 1.23749 billion (US$1.778 billion or 335 percent of quota) and was extended by five months on March 25, 2022.
Policy Assessment and Recommendations (IMF Statement Highlights)
- Monetary policy:
- The Central Bank of Costa Rica (BCCR) has responded proactively to shocks, adjusting monetary policy in line with its data-dependent and forward-looking approach.
- The BCCR is taking steps to strengthen its reserve position, deepen the FX market, and promote exchange rate flexibility.
- Important legal amendments are underway to strengthen the BCCR’s governance, autonomy, and operational framework.
- Fiscal policy:
- Continued fiscal consolidation is key, building on strong fiscal performance to date.
- Planned reforms should increase the fairness and progressivity of taxes, improve the equity and efficiency of spending, and strengthen debt management.
- There is scope to re-examine the fiscal rule while ensuring it preserves its essential role in containing spending and reducing debt.
- Social and labor policies:
- Authorities have provided targeted support to alleviate the impact of inflation on the most vulnerable.
- Advancing planned reforms to strengthen social protection, incentivize formal employment, improve the quality of education, and boost female labor force participation will foster a more dynamic and equitable economy.
- Financial sector:
- Supervisory authorities’ continuous proactive monitoring of the financial system is important.
- Critical reforms recommended include strengthening bank supervisory and regulatory powers, enhancing the legal framework for bank resolution and deposit insurance, and fostering bank competition.
- RSF purpose:
- The RSF arrangement will support Costa Rica’s agenda to build climate resilience and transition to a zero-carbon economy.
- The authorities’ RSF access request is underpinned by a strong reform package and aims to catalyze further financing from official and private partners.
Selected Economic and Financial Indicators (Key Projections and Levels)
- Output and Prices (Annual percentage change)
- Real GDP: 2019: 2.4; 2020: -4.1; 2021: 7.8; 2022: 4.3; 2023: 2.9; 2024: 3.0; 2025: 3.2; 2026: 3.3.
- GDP deflator: 2019: 2.6; 2020: 0.2; 2021: 2.1; 2022: 5.4; 2023: 4.4; 2024: 3.5; 2025: 3.1.
- Consumer prices (period average): 2019: 0.7; 2020: 1.7; 2021: 8.6; 2022: 6.4; 2023: 3.8.
- Savings and Investment (In percent of GDP)
- Gross domestic saving: 2019: 14.8; 2020: 16.4; 2021: 15.9; 2022: 16.5; 2023: 16.6; 2024: 16.8.
- Gross domestic investment: 2019: 16.1; 2020: 15.8; 2021: 19.7; 2022: 20.5; 2023: 20.2; 2024: 20.0; 2025: 19.8.
- External Sector
- Current account balance: 2019: -1.3; 2020: -1.0; 2021: -3.3; 2022: -4.6; 2023: -4.3; 2024: -3.6; 2025: -3.4; 2026: -3.2; 2027: -2.9.
- Trade balance: 2019: -6.0; 2020: -2.7; 2021: -4.4; 2022: -7.3; 2023: -7.4; 2024: -7.2; 2025: -7.0; 2026: -6.9.
- Financial account balance: 2019: -2.0; 2020: -1.9; 2021: -2.5; 2022: -3.1.
- Foreign direct investment, net: 2019: -4.2; 2020: -2.6; 2021: -4.8; 2022: -5.1; 2023: -4.9; 2024: -4.7.
- Gross international reserves (millions of U.S. dollars): 2019: 8,937; 2020: 7,232; 2021: 6,921; 2022: 8,241; 2023: 8,695; 2024: 9,359; 2025: 9,530; 2026: 10,261; 2027: 10,891.
- Gross international reserves - as percent of ARA metric: 2019: 132.5; 2020: 105.4; 2021: 94.2; 2022: 98.9; 2023: 100.2; 2024: 102.0; 2025: 100.9; 2026: 103.1; 2027: 104.3.
- External debt: 2019: 47.8; 2020: 50.8; 2021: 51.3; 2022: 54.6; 2023: 55.5; 2024: 56.6; 2025: 56.0; 2026: 56.2; 2027: 55.9.
- Public Finances (Central government)
- Central government primary balance: 2019: -3.8; 2020: -0.3; 2021: 1.1; 2022: 1.3; 2023: 2.0; 2024: 2.2; 2025: 2.3.
- Central government overall balance: 2019: -6.7; 2020: -8.4; 2021: -4.0; 2022: -2.3.
- Central government debt: 2019: 56.4; 2020: 67.2; 2021: 68.2; 2022: 66.3; 2023: 65.8; 2024: 64.8; 2025: 63.3; 2026: 61.8.
- Money and Credit
- Credit to the private sector (percent change): 2019: 3.4; 2020: 3.7; 2021: 6.2; 2022: 5.0; 2023: 5.8; 2024: 6.5; 2025: 6.8.
- Monetary base (narrow definition) 2/: 2019: 7.1; 2020: 8.3; 2021: 7.9; 2022: 7.3; 2023: 7.2; 2024: 7.4.
- Broad money: 2019: 44.8; 2020: 55.0; 2021: 54.1; 2022: 48.9; 2023: 48.5; 2024: 48.6; 2025: 48.8.
- Memorandum Items
- Nominal GDP (billions of colones) 3/: 2019: 37,832; 2020: 36,356; 2021: 39,993; 2022: 43,992; 2023: 47,275; 2024: 50,410; 2025: 53,662; 2026: 57,142; 2027: 60,752.
- Output gap (as percent of potential GDP): 2019: 0.1; 2020: 0.8; 2021: 0.3; 2022: 0.0; 2023: -0.1.
- GDP per capita (US$): 2019: 12,691; 2020: 12,118; 2021: 12,436; 2022: 13,159; 2023: 13,868; 2024: 14,321; 2025: 14,888; 2026: 15,526; 2027: 16,189.
- Unemployment rate: 2019: 12.4; 2020: 13.7; 2021: 12.5; 2022: 13.2; 2023: 13.0; 2024: 12.0; 2025: 10.5; 2026: 9.0.
Source: IMF Press Release No. 22/382 — IMF Communications Department, November 14, 2022.