AMCostaRica©
AMCostaRica©
.
The presentation of the plan
follows the recent announcement that the
deficit last year was of 6.96% of gross
domestic product.
- Casa Presidencial and wire
services photos -
|
- Published:
Tuesday, February 11, 2020 -
Government presents a plan
to reduce its deficit
By the A.M. Costa Rica staff
Rodrigo Chaves-Robles, minister of
Finance, outlined to lawmakers Monday a
broad plan to reduce the deficit, improve
the economy and generate more jobs.
According to Chaves, the plan includes a
program to improve government finances
four ways: reduction of tax evasion,
reduction of public spending, reducing the
government debt and making extra payments
on current government debt.
The presentation of the plan follows the
recent announcement that the deficit last
year was of 6.96% of gross domestic
product.
According to Chaves, this level of deficit
is mainly because of interest payments on
debt amount to 28.33% of total government
revenues. The government expects to reduce
the deficit at 5.1% of gross domestic
product this year.
According to Chaves, the plan to improve
government finances includes using a fund
of approximately $3.94 billion, the sum of
public institutions surpluses, to reduce
the deficit.
Another action will be the reduction of
tax evasion. To achieve that goal,
technological improvements will be made on
the platforms of the Ministry of Finance
to improve tax collection systems, said
Chaves. These improvements will cost $160
million, which will be financed with a
loan from the World Bank.
He also specified these actions:
- A review of tax exemptions granted
institutions will be carried out to avoid
extra ones.
- The profits of state banks and other
public institutions will be used to pay
off part of the government debt and
interest payments.
- The government will ask the legislature
to approve $4.5 billion in bonds at lower
rates to reduce the payment of interest by
$62 million per year.
- The government will also request another
loan from international banks for $1.4
billion, to reduce the payment of interest
on government debt by about $76 million.
- To reduce government spending, the plan
will merge some public organizations.
- The government will presents the
legislature a bill, known as the Public
Employment Law, to regulate the salaries
of public employees.
- The government will freeze for at least
two years the hiring of employees who are
already receiving a pension from the
government, except teachers or police
officers.
_ The government will seek to reduce the
rental of buildings for the use of public
institutions.
- The government will sell the
International Bank of Costa Rica, which is
currently owned by public government
banks, and it is located in Panamá. With
this sale, the government expects to make
an extra payment on its debt.
- The government will sell or give a
concession to a private investor to
operate the National Liquor Factory. This
state-owned company currently generates
losses for the state, said the government
in its statement.
- Officials will seek to strengthen the
National Production Council. It is a
public institution in charge of the
protection of small and medium
agricultural operations.
According to Chaves, on March 1 additional
set of measures will be announced to
reduce government debt by at least 1
percent of gross domestic product.
"This series of actions would generate a
better financial environment and therefore
more attraction of companies to the
country, directly improving the generation
of jobs for Costa Ricans," said the
government in its statement.
Gross domestic product is defined as the
sum of all transactions of goods and
services. The gross domestic product for
Costa Rica is estimated at from $70 to $80
billion for 2020.
The annual deficit is the difference
between government spending and government
income each year. That amount is covered
by the country borrowing money that
increases an already large national
deficit. That is why payment of interest
on debt is so high.
Last week, Lawmakers of the
Legislative Assembly approved the proposal
presented by Deputy Pedro Muñoz-Fonseca,
to call Chaves, to a hearing to
discuss the increase of the nation's
financial deficit.
According to the deputies, government
authorities must give explanations on the
issue of the increase in the deficit,
which reached almost 7 percent in 2019.
"The motion is for the minister of Finance
to come on behalf of the government to
give us an explanation," said Muñoz.
According to the report on the country's
balance, made by the Ministry of Finance,
the primary deficit increased from 2.32%
of the gross domestic product in 2018 to
2.78% in 2019. The primary deficit
involves the loss in paying direct
expenses of the government. The full
financial deficit includes an additional
4.18 percent of the gross domestic product
that comes from paying interest on loans.
-----------------------
What else could the government do to
reduce the annual deficit? We would like to know your
thoughts on this story. Send your
comments to news@amcostarica.com
|
|
|
|
