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Financial instability puts social well-being at risk

Financial instability puts social well-being at risk

The International Institute for the Development of the Private Sector points out that the country’s situation should be addressed as a question of fiscal adequacy rather than simply the ability to sustain public debt, as the authorities have understood it.

Written by Lionel Ibarra – Strategyandbusiness.net

Costa Rica’s economy, one of the most dynamic economies in the Central American region, has lost its growth rate, among other things, due to the loss of financial momentum, the low level of investment as a result of the decline in foreign investment in the country and the loss of international competitiveness in recent years; He points to a report prepared by the Central American Institute for Fiscal Studies (ICEFI) on the challenges of the new government.

The report indicates that the country is still considered an economy with a high level of Human Development and above average income. However, in recent years, achievements have been placed in the field of social welfare” in danger for financial instabilitywhich was manifested by the growing public debt and the fiscal deficit resulting primarily from the decrease in tax effort and the increase in public spending.

ICEFI sees the Costa Rican government continuing its effort in fiscal arrangement, however, to achieve these results, the model indicates, in its negative estimate, a decrease in public spending of 2.3% of GDP in 2022-2027, coming mainly from salary cut The interest on debt is repaid at 1.6% and 0.8% of GDP, respectively.

The document states that “the Costa Rica problem must be addressed as a matter of fiscal sufficiency and not merely of debt sustainability, as understood by the country’s authorities.”

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Thus, it is not only a matter of ensuring that the fiscal figures reduce the fiscal deficit and the amount of Public debtbut also that the resources available from the state remain at the appropriate levels to meet the growing needs of the country’s population.

“As such, even when the regulation and arrangement of public spending is appropriate, all replenishment must come from a process Reengineering that determine the probabilities of achieving the same or greater results with a lower or similar level of public resources”, noted in the ICEFI report.