The Inter-American Development Bank (IDB) approved a $350 million loan that Costa Rica had requested to support the country’s fiscal sustainability.
The resources will be used to support the country in the implementation of its tax reform program, aimed at improving efficiency in public expenditure management (employment and administrative reform), the effectiveness of the macro-fiscal institutional framework and the management of the country’s tax system.
This loan has a repayment term of 20 years, a grace period of five and a half years and a rate based on LIBOR.
The objective of the project is to approve legal instruments of fiscal policy and management that reinforce sustainability and efficiency, both on the expenditure side and on the revenue side.
This will include the approval of a fiscal rule (Law on Strengthening of Public Finances) to control spending and a proposal for the design of an Independent Fiscal Council.
Regarding the modernization of the design and management of the tax system, it is expected to approve a tax reform that includes the creation of a Value Added Tax (VAT) that includes services and greater progressivity in income tax and start-up of electronic invoicing for large taxpayers,”
says the IDB report.
This is the second multilateral credit received this year by Costa Rica, after the Andean Development Corporation (CAF).