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Published Wednesday, July 8, 2020

Government urges Congress
to approve a loan with the IMF


By the A.M. Costa Rica staff


The government, through the Economic Council, requested to Congress the approval of a $508 million loan from the International Monetary Fund (IMF).

According to the government, the loan is to finance this year's budget.

"A delay in such approval could negatively impact the timing of negotiations for an agreement with the IMF, and limit the possibilities of Costa Rica to obtain financing amid the pandemic," said Rodrigo Cubero, Governor for Costa Rica before the IMF.

Costa Rica and the world face one of the biggest economic crises of the last century, as a result of the impact generated by the pandemic. It is estimated that in 2020 the national economy will decrease by 3.6%, with a partial recovery of 2.3% in 2021, the government said in its statement.

The financing plan with loans this year is programmed to be equivalent to 7.3% of GDP, according to the government.

Of these, Congress has already approved loans equivalent to 3.6% of GDP. Other loans equivalent to 0.8% of GDP have already been presented to Congress for its approval. And the list continues. Other loans also equivalent to 0.8% of GDP would be presented to Congress in the coming weeks.

Additionally, loans equivalent to 2% of GDP are in the process of being negotiated with international banks.

On June, the government presented to the deputies of Congress the agreement of a new loan of $504 million with the IMF.

The credit is to meet the crisis caused by the restriction measures ordered by the government since March to contain the expansion of the covid-19.

The $500 million-plus loan was agreed at an interest rate of 1.55% per year. The term of five years includes quarterly payments from the third year of disbursement, the government said.

"This loan is important in the effort that the government has followed to change expensive debt for cheaper debt, which helps throughout the process of fiscal consolidation," said Elian Villegas, Minister of Finance. "Furthermore, it is a sign of confidence of the IMF on the route taken by the Government.”



On May 18, Congress approved a $379 million loan between the government and two international banks, the Inter-American Development Bank, IDB, and the French Development Agency, or AFD for its French initials.

According to Congress, the loan with AFD was originally asked to finance Costa Rica's decarbonization plan, but will now be used to support the crisis due to the pandemic.

The IDB offered $230 million and about $149.5 million was offered by the AFD, announced the government.

The loans offered on favorable terms will be used to finance the Protect Plan, according to the government. There is a repayment term of 20 years and a grace period of 5.5 years. The IDB interest rate is 3-month LIBOR plus 0.92%, and the AFD interest rate is 6-month Euribor plus a 1.3% margin.

As part of the government Plan Proteger (the Protection Plan in English), the so-called “Bono Proteger” which is a monetary aid for people affected at their place of employment by the suspension of commercial operations imposed by the government since March, is part of the precautionary measures to contain the expansion of covid-19.


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Is it a good strategy for the government to continue getting loans through international banks? We would like to know your thoughts on this story. Send your comments to news@amcostarica.com

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