If you ask me today if I have it, I say no (…). There is never that liquid money in an entity like the Ministry of Finance in the circumstances in which it is. Today, the Treasury is, as we say there in Guanacaste, ‘coyol bankrupt, coyol eaten’, which means that the money that goes in, is spent,” said the deputy minister of Finance, Nogui Acosta.
This means that public sector workers who normally get their year-end bonus in the first in December may have to wait like many others, near Christmas to get and spend their aguinaldo due to the financial crisis the government if facing, scrambling to find the funds to pay the year-end bonus.
Although he does not rule out the early payment of the ‘Aguinaldo’, President Carlos Alvarado on Wednesday did not rule out that this year the government will pay the aguinaldo near the ‘legal’ deadline, which is December 20.
President Carlos said that the Minister of Finance, Rocio Aguilar, is making all the necessary efforts to get money to meet the payment of the Aguinaldo for all is 165,000 Central Government employees.
In an interview with La Nación, President Carlos declared that “there is significant pressure” in the search for resources to pay this year’s bonuses for government worker which amounts to some ¢210 billion colones.
Important to note, that the aforementioned amount is due workers of the central government. Employees of public institutions such as ICE, Recope, AyA, for example, are paid from their respective employers and are not part of the central government worker pool.
When asked how much of the ¢210 billion does the government have, Acosta replied with only one word: “Nada” (nothing).
The situation is worse.
The deputy minister went further, saying that problem is not only with the aguinaldo, but extend to the payment of wages and the payment to investors who lent money to the government to finance their expenses, for example.
“I’m going to tell you what is happening. Here you have to take into consideration several things. There are maturities of holders of securities that are going to be paid before the payment of the aguinaldo,” said Acosta.
The deputy minister explained that the money comes in and goes out.
“I get the money for salaries and pay salaries, and again I am left with nothing. I mean, I have to refill the ‘buchaca’ (pocket) until the next ‘quincena’ (payday). And I also have to be aware of the deadlines and pay suppliers and all that kind of things. In other words, I live day-by-day,” continued Acosta.
The senior government official maintains that the government will honor its commitments.
But at what cost to do so?
Faced with the growing fiscal deficit (excess of spending on income), the Treasury has to borrow more and more money to finance its expenses, because the money that comes through taxes is not enough.
“The problem is that investors, when they perceive a risk that the government does not have the resources to pay, are reluctant to contribute money or they charge very dearly for it. The market is very dry,” explains Acosta.
What would happen if, as of December 20, the last day by law to pay the aguinaldo, the government did not get the money?
The deputy minister was frank in his response: “What happens when people are in a distressing situation? They go to the bank and, if the bank does not lend them, they go to the usurer (loan shark) at the corner who charges 100% per month. Well, I’ll go to that and, then, the interest rates are going to shoot up a lot; that’s what we’re trying to keep from happening.”
Not the first time
This is not the first time that the government is so tight to pay its expenses. The same occurred last year.
In 2017, the government of Luis Guillermo Solís denied it at the time, though the truth was revealed last August by the national treasurer and former deputy minister of Expenses, Marta Cubillo, before the legislators of the Commission for the Control of Income and Public Expenditure.
She related that, in December of 2017, they lacked the resources to pay the aguinaldo on the same day they had planned to do so and, finally, they were able to do so when money came from a sale of bonds to investors.
Since then, the country’s fiscal situation has worsened.
Plug for Fiscal Reform
Deputy Minister Acosta maintains that a resolution of the Constitutional Court favorable to the processing of the tax reform would change the perception of investors.
“These people (the investors) are going to say ‘this country is willing to make changes, it is willing to tighten the belt’, and that will give me the peace of mind that, in the future, with good management of public finances, we will have the resources to pay,” he said.
“Every time we are in a slightly more convulsive situation,” explained Acosta, who likened the government’s situation to that of a company, that does not have all the money (to pay its expenses) at all times.
“Due to the same dynamics of the cash flow that we have today due to the fiscal situation, I am facing my payments depending on how much I collect from taxes and how much I am going to borrow from the market to be able to meet those payments,” said Acosta.
In the interview with La Nacion, Acosta said, “People think that the fact that I have a budget means that I have the money, and that is not the case. When I make a projection of income, I assume the money that is going to enter is so much, and also I assume a position of indebtedness (…)”.
So, what is the answer to “Does the government have the money to pay the bonuses for this 2018?”
In a word “no”.
But Acosta and President Carlos seem to be sure that they will find it and meet their obligations, no matter the cost.
