Tuesday 22 June 2021

Reversing public debt of 80% of GDP would take up to 10 years

Economists point out that the situation is "gigantic serious" and that the Government should not wait any longer to communicate it to the population

(QCOSTARICA) It could take up to 10 years to considerably reduce Costa Rica’s public debt, after it takes a gigantic step and reaches 80% of gross domestic product (GDP) by the end of 2021, according to estimates by the Ministry of Finance.

Economists Olman Segura, director of the International Center for Economic Policy for Sustainable Development (Cinpe) of the National University (UNA), and José Luis Arce point to a decade to get out of the quagmire and return to a debt of 60% of GDP.

According to Olman Segura, director of the International Center for Economic Policy for Sustainable Development (Cinpe), for the government to lower the debt / GDP ratio, a clear plan is required to boost trade Photo: Rafael Pacheco.

- Advertisement -

The specialist Gabriel Alpízar estimates that the process would take no less than four or five years and, for Alberto Franco, the debt will continue to grow until 2024, a year in which the curve could begin to flatten if the appropriate measures are taken.

In fact, by asking the International Monetary Fund (IMF) for the quick credit of US$508 million, which has just been approved in Congress, the Government committed to reducing public debt to 50% of GDP by 2034.

At the end of 2019, public debt was equivalent to 58.5% of GDP. In 2020, with the pandemic crisis, it will rise to 70.3% and, next year, it will skyrocket to 80.5%.

Economists Olman Segura and Gabriel Alpízar agree that the Government should not wait any longer to communicate with transparency to the population the seriousness of the situation and implement the high level of discipline that is required to face the task.

- Advertisement -

The biggest problem with public debt is that it chokes a country’s finances in the same way that loans and credit cards choke many families.

“It is as if a family had their credit card almost full and they have no way to pay the interest; they look for another card to pay the interest on the first one and now they have two, and then you have a third card and a fourth. We are entering a very important crisis and that is where the Government has to consider fiscal discipline,” Segura said.

“Either we take our children out of private school, or we sell the car or we spend less a month on gasoline, or we lower our purchases,” added the economist, who believes the goal should be to return to a debt of 60% of GDP, a margin that is still considered extremely high, according to the parameters set in the fiscal rule.

However, it is unlikely that a mess of such magnitude can be repaired quickly.

“It will not be a quick process, because the magnitude of the adjustment to be made in income and expenses is considerable (…) the reduction in the primary deficit may take two or three years, and the fall in the level of public debt at 60% it can take more than ten years, inclusive,” said José Luis Arce.

 

- Advertisement -

 

- 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.

Ricohttp://www.theqmedia.com
"Rico" is the crazy mind behind the Q media websites, a series of online magazines where everything is Q! In these times of new normal, stay at home. Stay safe. Stay healthy.

Related Articles

Carlos Alvarado: “If we don’t give stability to the economy, everything will go to hell”

QCOSTARICA - "If we don't give stability to our economy, forgive...

S&P maintains Costa Rica’s rating but warns of a possible downgrade if loan with the IMF fails

QCOSTARICA - The risk rating agency Standard and Poor's (S&P) confirmed...

MOST READ

Carlos Alvarado: “Don Rodolfo has my confidence”

QCOSTARICA - President Carlos Alvarado said he has all the confidence in his Minister of Public Works and Transport (MOPT, Rodolfo Méndez Mata, and...

Germany opens borders to Ticos from this Friday!

QCOSTARICA - Good news for Ticos with traveling fever! From Friday, June 25, Germany will allow entry of travelers from Costa Rica as long...

Despite investigation, construction of road works by H. Solís will continue

QCOSTARICA - Five major road works under the responsibility of the H. Solís company will continue in development despite investigations for alleged corruption involving...

Today’s Vehicle Restriction June 18: 9 & 0 CANNOT circulate

Today, Friday, June 18, vehicles with plates ending 9 & 0 CANNOT circulate The measure is countrywide and applied between 5:00 am and 9:00 pm,...

Vaccination commission endorses J & J vaccine, says no to Sinovac

QCOSTARICA - The Comisión Nacional de Vacunación y Epidemiología (CNVE)  - National Vaccination and Epidemiology Commission - endorsed the use of Johnson and Johnson...

Today’s Vehicle Restriction June 20: only “EVENS” can circulate

Today, Sunday, June 20, only vehicles with "EVEN" ending plates CAN circulate The measure is countrywide and applied between 5:00 am and 9:00 pm, save...

Today’s Vehicle Restriction June 22: plates ending in 3 & 4 CANNOT circulate

Today, Tuesday, June 22, plates ending in 3 & 4 CANNOT circulate. The measure is countrywide and applied between 5:00 am and 9:00 pm, save...

American woman found lifeless in hotel bathroom in Sabana

QCOSTARICA - A sad discovery occurred this Thursday morning in a hotel located in La Sabana, in San José, the lifeless body of a...

Will that be Cash or Sinpe Móvil?

QCOSTARICA - Sinpe Móvil is easy to use. From your phone, you can send money to friends, family and pay for things. Or receive...

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.