Tuesday 3 October 2023

World Bank approves US$300 million to Costa Rica for “post-pandemic” economic recovery

The loan would be added to the one agreed with the IDB the previous week; both must be approved by the Legislative Assembly

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03 October 2023 - At The Banks - Source: BCCR

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QCOSTARICA – The executive board of the World Bank approved on Tuesday a loan for us$300 million to Costa Rica, in order to support the post-pandemic economic recovery process.

The pandemic strongly affected Costa Rica’s business sector resulting in many forced closures. Both small and medium-sized companies began a recovery process that is already reflected in the economic activity indices, although many sectors are still depressed. Photo: downtown San Jose

With the funds, the organization said through a press release, it will seek to strengthen “small and medium-sized enterprises, reinforce fiscal sustainability and lay the foundations for a strong post-pandemic recovery based on green and low-carbon development.”

“This operation supports our efforts to respond to the different waves of the pandemic, while we continue to establish the conditions for a solid and sustainable recovery through economic, fiscal and climate action reforms,” ​​said Elian Villegas, Costa Rica’s Minister of Finance.

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The second “Development Policy Loan for Fiscal and Decarbonization Management” builds on the first loan approved on June 24, 2020. The series supports three mutually reinforcing pillars:

  • Support the response to the pandemic by focusing on the livelihoods of vulnerable populations, through cash transfers and measures to help preserve jobs and SMEs.
  • Contribute to increasing structural tax revenues and containing spending growth while ensuring the sustainability of public finances after the health crisis.
  • Promote green growth and low-carbon development for a post-pandemic recovery that is competitive, climate-smart and sustainable, including through measures to accelerate the deployment of clean technologies.

According to the World Bank, Costa Rica has a strong health care system and authorities responded promptly to the health emergency, but it has experienced major social, economic and fiscal impacts since 2020.

“We work together to protect the poor, the most vulnerable, and those who have lost their jobs or experienced income reductions, including women and youth,” said Michel Kerf, World Bank Director for Central America and the Dominican Republic.

The US$300 million Banco Internacional de Reconstrucción y Fomento (BIRF) – International Bank for Reconstruction and Development -, is a variable rate loan in US dollars and has a final maturity of 20 years, including a 4-year grace period.

On June 8, the Legislative Assembly approved another loan from the World Bank for US$300 million, to improve the profile of public debt through the exchange of expensive debt for cheaper debt.

More loans

On June 24, authorities from the Ministry of Finance and the Inter-American Development Bank (IDB) also signed an agreement that opens up the possibility for the country to access two budget support loans for a total of US$500 million.

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This loan will be added to the financing options that the Government has resorted to.

The money will allow the country to strengthen fiscal sustainability, maintain macroeconomic stability in the short and medium term, and support sustainable economic recovery.

Operations with the IDB will be for two loans for amounts ofUS$250 million each. However, after the process of planning and signing the agreement, the loan will go to the Legislative Assembly for approval.

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