Monday 14 June 2021

Moody’s Questions Tax Benefit Of Plan To Handle Illiquidity in Costa Rica

According to Moody's public spending cut is not enough and Foreign debt placement will be dangerous for the country due to foreign exchange risk

 

Expenditure cuts for 2018 will affect roads infrastructure as the Ministry of Public Works and Transport (MOPT) must reduce its expenses by ¢32 billion colones. (Photo: La Nacion)

According to Moody’s, the plan to reduce expenses announced by President Luis Guillermo Solís will not be enough to solve the illiquidity problem being faced, nor to avoid a rise in local interest rates.

- Advertisement -

The plan to cut costs that are not mandatory in the budget, such as the suspension of public purchases that have not yet started to be implemented, will not be enough to avoid the impact of the fiscal deficit on local interest rates.

This is the opinion of the rating agency Moody’s, regarding the cost cutting plan announced by President Solis to address the fiscal problem that is affecting the country.

See “No Hay Plata” – No Free Lunch In Costa Rica!

Gabriel Torres, senior analyst at Moody’s, told Nacion.com that “… “The proposals do not seem to deal with the fiscal problem, what has been announced will have no effect on reducing spending, much of it is already fixed.”

- Advertisement -

“… He added that the country will not be able to reduce its fiscal deficit with the announced plan, because a tax reform is necessary for effective measures. “The government will sooner or later be in trouble and we are seeing the first indications with the increase of interest rates and liquidity difficulties because the local market will become more cautious of so much debt issued by the Government.”

The option to finance debt issuance abroad is not well viewed by Moody’s. Torres said that ” … Returning to the international market is very dangerous because it depends on foreigners again and increases the exchange risk on government finances due to strong movements in rates or a devaluation.

- Advertisement -

FACT CHECK:
We strive for accuracy in its reports. But if you see something that doesn’t look right, send us an email. The Q reviews and updates its content regularly to ensure it’s accuracy.

Q Costa Rica
Reports by QCR staff

Related Articles

Loans in dollars loses attractiveness for those who earn in colones

QCOSTARICA - Loans in dollars, which had a great boom in...

Moody’s, Fitch and S&P distrust political support for plan with IMF

QCOSTARICA - The international risk rating agencies Moody’s, Fitch Ratings and...

MOST READ

Costa Rica will have a system to reduce marine pollution

QCOSTARICA - Costa Rica will have a system called "Interceptor" that will eliminate floating and suspended waste from the upper layer of its waters,...

Which countries could follow El Salvador by making it legal tender?

Q24N - El Salvador may be the first country to adopt bitcoin as legal tender, but recent developments suggest that it might not be...

Today’s Covid News: A slight drop in new cases and deaths is seen

QCOSTARICA - Faced with wasting a vaccine dose when people in the priority groups scheduled do not show up, and a substitute cannot be...

Southwest adds yet another route to Liberia, now from Denver

QCOSTARICA - Southwest airlines will add a new route to the Daniel Oduber International Airport, in Liberia, this time connecting with the city of...

Today’s Vehicle Restriction June 14: 1 & 2 CANNOT circulate

Today, Monday, June 14, vehicles with plates ending 1 & 2 CANNOT circulate The measure is countrywide and applied between 5:00 am and 9:00 pm,...

Today’s Covid News: Contagion rate in Costa Rica remains unchanged in the last week

QCOSTARICA - The contagion rate of covid-19 in Costa Rica in the last week did not change, a fact that is seen for the...

The “rebound” effect boosted growth in Costa Rica’s economic activity

QCOSTARICA - Costa Rica's economic activity registered in April 2021 a year-on-year growth of 8.8%, a figure affected by a “base” or “rebound” effect,...

Should the vaccination against covid-19 be opened?

QCOSTARICA - Six months after the start of vaccination against covid-19, will it be time to open the campaign to those who want to...

Daniel Ortega undertook a hunt for presidential candidates and opponents

TODAY NICARAGUA – In an unprecedented persecution, the Daniel Ortega regime detained four presidential candidates in one week, a move that is part of...

WANT TO STAY UP TO DATE WITH THE LATEST!

Get our daily newsletter with the latest posts directly in your mailbox. Click on the subscribe and fill out the form. It's that simple!

Log In

Forgot password?

Forgot password?

Enter your account data and we will send you a link to reset your password.

Your password reset link appears to be invalid or expired.

Log in

Privacy Policy

Add to Collection

No Collections

Here you'll find all collections you've created before.