San José, Costa Rica, since 1956
Economy

Costa Rica’s fiscal deficit to reach 6.9 percent of GDP in 2016

Costa Rica’s 2016 budget is set to see the smallest percentage increase in 10 years, but the deficit continues to rise, according to comments from acting Finance Minister José Francisco Pacheco on Tuesday. The Solís administration’s “austere” ₡8 trillion ($15 billion) budget did not propose any cuts to services or benefits, focusing its cuts almost exclusively on the executive branch.

Next year’s budget proposal was presented to Legislative Assembly President Rafael Ortiz and lawmaker Rosibel Ramos, both of the opposition Social Christian Unity Party, during a ceremony at the Assembly in San José. Officials used words like “crisis” and “precarious” to describe the country’s fiscal situation after years of legislative gridlock that have been unable to rein in Costa Rica’s deficit, despite several downgrades from international ratings agencies.

Costa Rica’s fiscal deficit is set to reach 6.9 percent of gross domestic product during the next budget cycle – 0.5 percent higher than in 2015. The country’s total debt is equivalent to 49 percent of the GDP, Pacheco told reporters.

Members of the Solís administration said they would not propose any tax legislation during the first year in power, but that is certainly not the case this go-round. The executive branch has been pushing eight different bills designed to improve tax collection, from new taxes to improving collection under existing laws. Since 2009, Costa Rica’s tax collection as a percentage of GDP has been essentially flat at roughly 14 percent of GDP, according to figures from the Finance Ministry. Meanwhile, spending has steadily increased during the last six years.

Pacheco said that the government’s hands were tied when it came to tackling the fastest growing parts of the budget. Servicing the country’s debt accounts for 31 percent of the 2016 budget proposal followed by 30 percent for education spending, which is constitutionally mandated to be 8 percent of GDP. Pensions account for another 11 percent, leaving the remaining 28 percent to run the rest of the Costa Rican government for the 2016 calendar year.

“What room to we have to address these areas?” Pacheco asked, repeating the government’s call for fiscal reform and new tax collection measures.

During the past several years, Costa Rica was able to auction tranches of $4 billion in Eurobonds to help close its budget gap but the last of that sovereign debt was issued during the first half of this year. “We’re going to have to look elsewhere” to address the shortfall, said Pacheco.

The bill now goes to the Legislative Assembly, which has until Nov. 29 to approve it. Once approved, the new budget will go into effect on Jan. 1, 2016.

Contact Zach Dyer at zdyer@ticotimes.net

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Rusty

Pacheco, Uses ” Hands tied” and ” Look elsewhere”.. This is all code for higher taxes. No one in government Diputados, President , CEO’s and those getting huge salaries( 10K /per month or more) and the dreaded consultant fee’s have it in the interest of THEIR country to cut the pensions, salaries and spending.

The band plays on as the country sinks. Now President Solis announced another trip to Washington DC, With his posse in tow expense accounts costing a cool million or more on the backs of the poor and taxed out Costarricense here.

What do they get back from this? Nothing more debt and hand wringing as another company relocates to another country. The past years. There has been 12 companies I know of that have downsized or closed.. ( Mabe, HP, Intel, Burger King, F. exporting plants, Rawlings, David Cement, Global Park call center for Capital one. Jacks and so on)

High price commercial electricity, water, business taxes, permits, inspectors demanding bribes or close your business , red tape, Empoyees have more rights than the owner, Caja and social security payments. Frankly, Business is close in CR, last one out turn off the lights please. Here comes China licking their collective lips taking over.

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