Costa Rica: Sovereign Asset and Liability Management – Scoping Mission

High-Level Summary Technical Assistance Reports, June 15, 2023

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High-level summary technical assistance report on sovereign asset and liability management (SALM) for Costa Rica.
Aided by a 36-month Extended Fund Facility in place since March 2021, Costa Rica’s reform efforts toward strong, inclusive, and sustainable growth are showing tangible results.
The balance sheet analysis in this report is described as a first step to developing a consolidated sovereign balance sheet.

A comprehensive SALM framework can have significant advantages over separate management of sovereign assets and liabilities.
It allows for:
- analysis of the financial characteristics of the whole balance sheet of the sovereign,
- identification of sources of costs and risks,
- quantification of the correlations among these sources.
Implementing a full SALM framework can be challenging, but countries have applied it with a range of scope and policy objectives.

The central bank of Costa Rica’s balance sheet has negative equity and significant USD assets and liabilities.
Most state-owned enterprises are in reasonably good financial health and can fund some investment from their retained earnings.
The state-owned banks are profitable and liquid, and reflect dollarization in the economy.

Develop the consolidated sovereign balance sheet starting from the presented balance sheet analysis.
Consider SALM implementation that aligns scope and policy objectives with institutional capacity, given implementation challenges.
Use consolidated analysis to identify and quantify cost and risk sources and their correlations to inform liability management, asset deployment, and investment funding decisions.