Wednesday 8 February 2023

IMF sets its clear requirements for Costa Rica

The Public Employment Law ready before June and tax compliance improvement plan at the end of December, are some requesistes

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8 February 2023 - At The Banks - BCCR

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QCOSTARICA – The International Monetary Fund (IMF) finally said yes to the loan for almost US$1.78 billion and to the fiscal adjustment commitment proposed by Costa Rica.

Costa Rica has been prescribed the IMF pills as a condition of the almost US$1.78 billion dollar loan. Shutterstock

This step puts the country on the IMF’s radar to ensure that it complies with what has been agreed to.

After the approval, the IMF reiterated that there are multiple aspects that must be fulfilled, in case of advancing in the Legislative Assembly.

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For example, there will be five semi-annual reviews of the arrangement by the Fund to assess progress in the implementation of the program and reach understandings of any additional measures that may be necessary to achieve its objective.

There are goals of a more political nature based on the Carlos Alvarado government’s letter of intent, called Structural Benchmarks or Structural Milestones.

These include the approval of the Public Employment Law, no later than the end of May this year.

The fight against tax evasion is also included, because a new Tax Compliance Improvement Plan must be approved by the end of December 2021, with compliance strategies supported by more cross-comparison of large-scale automated information to detect inaccurate reports; as well as renewed audit programs focused on the Value Added Tax (VAT) on services and the erosion of tax bases through cross-border transactions.

Others refer to numbers, separated in quantitative performance criteria (QPCs), which are specific and measurable conditions that are related to macroeconomic variables under the control of the authorities; as well as Indicative targets (ITs) that are less specific in indicators where there is greater uncertainty, and as the uncertainty is reduced, these objectives can be converted into QPCs.

For example, a performance criterion on new arrears in external payments by non-financial entities of the public sector and the Central Bank, which must remain at 0.

Tasks and deadlines to be fulfilled by Costa Rica

  • Approval of the Public Employment Law: May 2021
  • Improve BCCR law to strengthen its autonomy: August 2021
  • Approval of a tax compliance improvement plan: December 2021
  • Publication of 2020 financial statements under IFRS standards for ICE, AyA and CNP: December 2021
  • Centralize and digitize economic social assistance programs: December 2021
  • Publication of the fiscal framework for the entire non-financial public sector for 2023-2026: April 2022
  • Debt management strategy publication for 2023-2026: April 2022
  • Roadmap for improving climate resilient infrastructure, including assessment of costs and financing option: September 2022.
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