IMF Concludes Third Review of Costa Rica’s Extended Fund Facility and Approves Request for Resilience and Sustainability Facility

  • The IMF Executive Board concluded today the third review under the Extended Fund Facility (EFF) for Costa Rica, allowing for an immediate disbursement equivalent to about US$ 270 million.
  • The IMF Executive Board also approved today the first arrangement under the newly established Resilience and Sustainability Facility (RSF) for about US$ 725 million to support Costa Rica’s ambitious climate change agenda and catalyze further financing.
  • The Costa Rican authorities are taking important steps to strengthen their economic reform program. Monetary policy needs to continue to proactively respond to shocks. Fiscal consolidation should advance, while strengthening social protection and fostering a more equitable economy.
  • Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed today the third review of Costa Rica’s economic reform program supported by the IMF’s extended arrangement under the Extended Fund Facility (EFF). Completion of this 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 also approved today 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 being contingent on the conclusion of relevant reviews under the EFF and implementation of scheduled reform measures.

    Costa Rica’s three-year extended arrangement under the EFF was approved on March 1, 2021, in the amount of SDR 1.23749 billion (US$1.778 billion or 335 percent of quota in the IMF at the time of approval of the arrangement, seePress Release No. 21/53) and extended by five months on March 25, 2022 (seePress Release No. 22/91).

    Following the Executive Board’s discussion on Costa Rica, Mr. Kenji Okamura, Deputy Managing Director and Acting Chair of the Board, issued the following statement:

    “I am pleased that today Costa Rica will become the first user of the Resilience and Sustainability Facility (RSF), a testament to the country’s commitment to tackle climate change and pursue green growth.

    “The Costa Rican authorities are taking important steps to strengthen their economic reform program. Nevertheless, global headwinds have started to slow economic activity amid elevated inflationary pressures, and the outlook remains subject to downside risks.

    “The Central Bank of Costa Rica (BCCR) has responded proactively to the shocks facing the economy, adjusting monetary policy in line with its data-dependent and forward-looking approach. Against a difficult external environment, the BCCR is taking appropriate steps to strengthen its reserve position and deepen the FX market, while promoting exchange rate flexibility. Important legal amendments are underway to strengthen the BCCR’s governance, autonomy, and operational framework.

    “Building on the strong fiscal performance to date, continued fiscal consolidation efforts is key, supported by planned reforms to 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 its essential role in containing spending and reducing debt is preserved.

    “The authorities have appropriately provided targeted support to alleviate the impact of inflation on the most vulnerable. Advancing planned reforms to strengthen social protection alongside actions to incentivize formal employment, improve the quality of education, and boost female labor force participation will foster a more dynamic and equitable economy.

    “The supervisory authorities’ continuous proactive monitoring of the financial system is important, accompanied by critical reforms to strengthen bank supervisory and regulatory powers, enhance the legal framework for bank resolution and deposit insurance and foster bank competition.

    “The RSF arrangement will support Costa Rica’s ambitious agenda to build climate resilience and transition to a zero-carbon economy. The authorities’ access request under the RSF arrangement is underpinned by a strong reform package and will support ongoing initiatives to catalyze further financing from official and private partners. “


    Costa Rica: Selected Economic and Financial Indicators

    Projections

    2019

    2020

    2021

    2022

    2023

    2024

    2025

    2026

    2027

    Output and Prices

    (Annual percentage change)

    Real GDP

    2.4

    -4.1

    7.8

    4.3

    2.9

    3.0

    3.2

    3.3

    3.2

    GDP deflator

    2.6

    0.2

    2.1

    5.4

    4.4

    3.5

    3.1

    3.0

    3.0

    Consumer prices (period average)

    2.1

    0.7

    1.7

    8.6

    6.4

    3.8

    3.3

    3.0

    3.0

    Savings and Investment

    (In percent of GDP)

    Gross domestic saving

    14.8

    14.8

    16.4

    15.9

    15.9

    16.4

    16.5

    16.6

    16.8

    Gross domestic investment

    16.1

    15.8

    19.7

    20.5

    20.2

    20.0

    19.8

    19.8

    19.7

    External Sector

    Current account balance

    -1.3

    -1.0

    -3.3

    -4.6

    -4.3

    -3.6

    -3.4

    -3.2

    -2.9

    Trade balance

    -6.0

    -2.7

    -4.4

    -7.3

    -7.4

    -7.2

    -7.0

    -7.0

    -6.9

    Financial account balance

    -2.0

    -1.9

    -2.5

    -4.6

    -4.3

    -3.6

    -3.3

    -3.1

    -2.9

    Foreign direct investment, net

    -4.2

    -2.6

    -4.8

    -5.1

    -4.9

    -4.9

    -4.8

    -4.8

    -4.7

    Gross international reserves (millions of U.S. dollars)

    8,937

    7,232

    6,921

    8,241

    8,695

    9,359

    9,530

    10,261

    10,891

    -as percent of ARA metric

    132.5

    105.4

    94.2

    98.9

    100.2

    102.0

    100.9

    103.1

    104.3

    External debt

    47.8

    50.8

    51.3

    54.6

    55.5

    56.6

    56.0

    56.2

    55.9

    Public Finances 1/

    Central government primary balance

    -2.6

    -3.8

    -0.3

    1.1

    1.3

    1.7

    2.0

    2.2

    2.3

    Central government overall balance

    -6.7

    -8.4

    -5.1

    -4.3

    -4.0

    -3.2

    -2.6

    -2.3

    -1.9

    Central government debt

    56.4

    67.2

    68.2

    67.2

    66.3

    65.8

    64.8

    63.3

    61.8

    Money and Credit

    Credit to the private sector (percent change)

    -2.3

    3.4

    3.7

    6.2

    5.0

    5.8

    6.5

    6.8

    6.8

    Monetary base 2/

    7.1

    8.3

    7.9

    7.3

    7.2

    7.3

    7.3

    7.3

    7.4

    Broad money

    44.8

    55.0

    54.1

    48.9

    48.5

    48.6

    48.8

    48.8

    48.9

    Memorandum Items

    Nominal GDP (billions of colones) 3/

    37,832

    36,356

    39,993

    43,992

    47,275

    50,410

    53,662

    57,142

    60,752

    Output gap (as percent of potential GDP)

    0.2

    -3.4

    0.1

    0.8

    0.3

    0.0

    -0.1

    -0.1

    0.0

    GDP per capita (US$)

    12,691

    12,118

    12,436

    13,159

    13,868

    14,321

    14,888

    15,526

    16,189

    Unemployment rate

    12.4

    20.0

    13.7

    12.5

    13.2

    13.0

    12.0

    10.5

    9.0

    Sources: Central Bank of Costa Rica, and Fund staff estimates.

    1/ For comparison purpose, starting from 2019, central government figures include public entities that are consolidated under the central government from 2021 onwards as required by Law 9524.

    2/ We use a narrower definition of monetary base that includes only currency issued and required reserves.

    3/ National account data reflect the revision of the benchmark year to 2017 for the chained volume measures, published in January 2021.

    Public Release. More on this here.