Press Release No. 23/240

IMF Executive Board Concludes the Fourth Review of Costa Rica’s Extended Fund Facility and the First Review under the Resilience and Sustainability Facility

June 26, 2023

• The IMF Executive Board concluded today the fourth review under the Extended Fund Facility (EFF) for Costa Rica, allowing for a disbursement equivalent to about US$ 275 million.
• The IMF Executive Board also concluded the first review under Costa Rica’s Resilience and Sustainability Facility (RSF) arrangement, making available about US$ 246 million in support of Costa Rica’s ambitious climate change agenda.
• The authorities continue to make important progress on Costa Rica’s economic reform agenda. Going forward, the overall policy stance should remain focused on durably bringing inflation back to target and keeping public debt on a firm downward path, while advancing reforms to achieve green, dynamic and inclusive growth.

The Executive Board of the International Monetary Fund (IMF) completed today the fourth review of Costa Rica’s economic reform program supported by the IMF’s extended arrangement under the Extended Fund Facility (EFF). Completion of this review makes available SDR 206.23 million (about US$ 275 million), bringing total disbursements under the arrangement to SDR 825.0 million (about US$ 1.1 billion).

The Executive Board also concluded today the first review under Costa Rica’s Resilience and Sustainability Facility (RSF) arrangement. Completion of this assessment makes available SDR 184.7 million (about US$ 246 million).

Costa Rica’s three-year extended arrangement under the EFF was approved on March 1, 2021, in the amount of SDR 1.23749 billion (US$1.778 billion or 335 percent of quota in the IMF at the time of approval of the arrangement, see Press Release No. 21/53) and was extended by five months on March 25, 2022 (see Press Release No. 22/91).

Costa Rica’s RSF arrangement was approved on November 14, 2022, in the amount of SDR 554.1 million (about US$ 725 million or 150 percent of quota in the IMF at the time of approval of the arrangement, see Press Release No. 22/382). Its duration coincides with the period remaining under the EFF, disbursements under the RSF being contingent on the conclusion of relevant reviews under the EFF and implementation of scheduled reform measures.

Following the Executive Board’s discussion on Costa Rica, Mr. Kenji Okamura, Deputy Managing Director and Acting Chair of the Board, issued the following statement:

“The Costa Rican authorities are making important progress on their economic reform agenda. Growth has been resilient despite global headwinds and inflation is on a strong downward trend. Program performance under both the Extended Fund Facility and the Resilience and Sustainability Facility remains strong.

“The Central Bank of Costa Rica (BCCR)’s data-dependent, forward-looking approach helped bring inflation back down. While there is scope for further monetary easing in 2023, policies should remain attentive to risks to the inflation outlook. The authorities are taking gradual steps to strengthen the BCCR’s autonomy, governance, and operational framework, and should persist in those efforts.

“Fiscal targets were met by large margins, further strengthening debt sustainability. Proposed tax reforms, including recently submitted legislation, will make the system more progressive, equitable, efficient, and environmentally friendly. The steady improvement in public debt management is also welcome. The implementation of the Public Employment Bill is taking longer than expected, but recent progress represents a crucial milestone toward a full implementation.

“The supervisory authorities’ continuous proactive monitoring of the financial system is important, as are the coming legal reforms to enhance the framework for bank resolution and deposit insurance, which will further strengthen the financial safety net.

“Important improvements to the targeting and efficiency of social programs are underway to help address relatively high poverty rates, and new incentives to formalize employment, support female labor force participation and entrepreneurship, and improve the business climate are key steps towards a more dynamic and equitable economy.

“The RSF arrangement is supporting Costa Rica’s ambitious climate change agenda. The authorities completed all RSF reform measures for this review, taking steps to incorporate climate considerations into fiscal planning and policy, infrastructure investments, financial sector supervision, and the investment of the country’s international reserves. The authorities are also intensifying efforts to attract climate financing from official and private sector sources.”