Thursday 20 January 2022

President Creates Thousands of Jobs For Bureaucrats

Money raised by the value added tax (VAT) served in part to pay payroll for new bureaucrats

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In almost two years (May 8) of is administration, President Carlos Alvarado allowed the creation of 37,000 jobs in the public sector, according to data from the Instituto Nacional de Estadísticas y Censos (INEC) – National Institute of Statistics and Censuses.

Of the 37,000 new jobs, 11,000 are in ministries, Legislative Assembly and Judicial Power, which generate pressure on the deficit, while the rest correspond to autonomous institutions, such ICE, AyA, Recope, etc,  which increase the cost of services.

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In its report, La Rupublica says the growth in the state payroll did not mean a greater expense for the central government since the application of the Ley de Fortalecimiento de las Finanzas Públicas – Law of Strengthening of Public Finances  – also known as the Reforma Fiscal, cushioned the impact by cutting bonusess and calculating the annuities as a fixed amount and not as a percentage.

In fact, the growth of salaries of the central government slowed down, going from 5.22% in 2018 to 3.09% in 2019, because it issued a decree to limit the salary increase to ¢3,750 biannually per person, according to the Minister of Finance, Rodrigo Chaves.

The minister says the State lost the opportunity to achieve savings of billions of colones, since the money that was obtained with the new taxes associated with IVA (Value Added Tax – VAT) and various changes in income was used to pay new positions.

The bad news is that this is happening at a time when Chaves announced that the fiscal deficit closed at 6.9% of GDP for last year, which represents the highest figure in the last 40 years.

It also in the middle of a dispute between the president and the opposition over the application of the fiscal rule, which limits the spending growth by 4.6% for 2020.

When Alvarado began his administration in 2018, there were barely 275,000 civil servants, while now, according to INEC, there are 312,000, half of which are in the central government.

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