## IMF Executive Board Approves a 36-month US$ 1.778 Billion Extended Arrangement under the Extended Fund Facility for Costa Rica and Concludes 2021 Article IV Consultation

_IMF News, March 1, 2021_

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## Bibliographic details
- Published: March 1, 2021

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### Program approval and financing
- The Executive Board approved a 36-month extended arrangement under the Extended Fund Facility (EFF) for Costa Rica with access equivalent to SDR 1.23749 billion (335 percent of quota, equivalent to US$1.778 billion).
- The Board’s approval allows for an immediate disbursement equivalent to US$296.5 million.
- The EFF arrangement follows Fund emergency support to Costa Rica in April 2020 (100 percent of quota, equivalent to US$521.7 million).
- The arrangement is expected to catalyze additional bilateral and multilateral financial support.
- The Executive Board also concluded the 2021 Article IV consultation with Costa Rica.

### Economic outlook and effects of the pandemic
- The pandemic has hit the economy hard, exacerbating pre-existing vulnerabilities and undermining expected yields from the 2018 fiscal reform.
- The recovery is expected to be protracted.
- The Costa Rican economy is projected to grow by 2.6 percent in 2021.
- Risks to the outlook remain elevated given the uncertainty surrounding the pandemic.

### Program objectives and policy pillars
- The IMF-supported program aims to:
  - support the recovery;
  - secure macroeconomic stability; and
  - advance the authorities’ home-grown reform agenda.
- The authorities’ policy efforts under the program will be anchored by three key pillars:
  - (i) gradually implementing equitable fiscal reforms to ensure debt sustainability, while protecting the most vulnerable;
  - (ii) maintaining monetary and financial stability, while continuing to strengthen the central bank’s operational autonomy and governance and addressing structural financial vulnerabilities; and
  - (iii) advancing key structural reforms to promote inclusive, green, and sustainable growth.

### Key policy commitments and recommendations (from Mr. Mitsuhiro Furusawa, Deputy Managing Director, and Acting Chair)
- Fiscal policy and social protection:
  - Authorities are committed to achieving a primary surplus by 2023 to place debt on a downward path.
  - Continue to secure adequate pandemic-related spending for 2021 and critical social and capital spending over the medium term to support growth.
  - Continued strengthening of social assistance programs and implementation of reforms envisaged under the Public Employment Bill to improve the equity and efficiency of government spending.
  - Other fiscal structural reforms will support the authorities’ fiscal strategy and mitigate fiscal risks.
- Monetary and financial stability:
  - The monetary policy stance remains appropriately accommodative.
  - Other monetary and financial sector measures have been transparent and well-targeted, providing timely support.
  - Greater development of the foreign exchange market will support effective risk management and increased intermediation in local currency.
  - Stepped-up monitoring and supervision will help ensure adequate bank capitalization.
  - Continue strengthening the central bank’s operational autonomy and governance and address structural financial vulnerabilities.
- Structural and macro‑structural reforms:
  - Implementation of an ambitious macro‑structural agenda, including promoting innovation and digitalization and fostering greater female labor force participation, to help lift potential growth and address inequality.
  - Costa Rica’s role in tackling climate change remains a key pillar: ongoing efforts on climate change mitigation and adaptation can generate new jobs and support sustainable and inclusive growth.

### Additional context
- The IMF noted that the authorities’ prompt response and well-established universal healthcare system have helped avoid a deeper crisis.
- The EFF builds on a broad-based dialogue and the 2018 fiscal reform.

*IMF Press Release No. 21/53, March 1, 2021*

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## References

- [Mitsuhiro Furusawa](http://www.imf.org/external/np/omd/bios/mf.htm)
- [Costa Rica and the IMF](http://www.imf.org/external/country/CRI/index.htm)
- [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
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_Source: https://www.imf.org/en/news/articles/2021/03/01/pr2153-costa-rica-imf-exec-board-approves-36-mo-ext-arr-eff-concludes-2021-art-iv-consultation_