The Comptroller General of the Republic (CGR) supports the approval of the credit between the government of Costa Rica and the Inter-American Development Bank (IDB) for $350 million, as it believes it’s positive to complement the internal savings in financing National Development.
The objective of these resources is to contribute to the consolidation of public finances, but they cannot count on the money without the approval of the legislators, even though the agreement between the parties has already been signed.
Good results have been visualized in terms of lower pressures on the domestic market, reduction of the financial cost for the public treasury, and in the greater availability of resources for private investment, as the explanatory statement of the present project also points out. Funding by multilateral organizations has been considered more favorable than other mechanisms such as the placement of securities, in terms of term and interest rates,”
reported the CGR.
The Central Bank, estimates that financing with these agencies, when contrasted with the local market, could save at least 300 basis points, for every dollar.
A decrease in the interest rates paid by the public treasury is key for compliance with the fiscal rule provided by Law No. 9635, and the different simulations on the evolution of the deficit and debt, such as those mentioned above,”
said the Comptroller.
In addition, the government still faces high financing needs, in fact, they could represent 12.3% of GDP by the end of 2019.
The Government plans to meet 3.9% of its financing needs for 2019 with budget support loans and issuance of international securities. With these resources, it hopes to meet its public financing needs to support actions aimed at achieving fiscal sustainability in the short and medium term, which will also allow to vent the domestic financial market,”
said the comptroller.
These measures will contain pressure on interest rates, which will have positive effects on private investment, economic growth and the financial cost of Central Government financing.
The loan has an interest based on the three-month Libor Rate plus a margin, a 20-year term to pay, a five-year grace period, a 15-year repayment period, a one-year disbursement period and a commission of financing that may not exceed 0.75%.
For now, the path to the approval of this credit is blocked, as many legislators have moved away from the discussion of this project, due to their annoyance at the agreements reached by government representatives with the leaders of the unions in the Health sector.
According to the legislators, the government betrayed their trust because on the one hand they requested a reform of new taxes and on the other, they accepted all the trade unionists’ requests.
Despite this, President Alvarado himself assured that if necessary he would go to negotiate with the Assembly for these resources.