QCOSTARICA – China’s government has said that it cannot at this time buy the US$1 billion dollar bonds offered by Costa Rica, money the administration of Luis Guillermo Solis needs to manage its growing fiscal deficit.
The lack of political conditions to implement greater controls on government spending and to gain approval for a tax package which would tidy up state finances is preventing multilateral lenders such as the World Bank or the IMF from lending money to Costa Rica, meaning that, after the elimination of the option to sell bonds to the Chinese government, Costa Rica will have to resort to the domestic market for funds, which will inevitably push up the cost of money for all sectors, including production.
Noting that “… the conditions are not right for China to buy US$1 billion of Costa Rican debt bonds,” President Solis announced that restructuring of the country’s external debt through the sale of bonds to China is no longer viable. In this new scenario, the government plans to focus its efforts on approving “… projects to combat tax evasion, reduce tax exemptions, focus on the management of the State General Fund, resurrect the tax on legal entities and the public discussion on employment. ”
Nacion.com reported that President Solis said that “… ‘The Chinese government has not ruled out possibly participating in the purchase of these bonds [in the future], but it is not something that currently seems to be an option for the tax plan.'”
Source: Nacion.com
