Costa Rica is reportedly in talks with the International Monetary Fund (IMF) to get US$1.75 billion in loans, as the Central American country prepares to kick-start the economy battered by the COVID-19 pandemic.
Stimulating the economy is inevitable for Costa Rica because the pandemic has dealt a deadly blow to the tourism industry, the country’s largest employer, and also a major earner of dollar currency.
The economy will have to put up with more pain without a major loan package, the country’s President Carlos Alvarado told Reuters in an interview recently.
Costa Rica may ultimately fail to land a deal with the international lender, says the news wire, pointing to the growing opposition in Congress controlled by opposition parties.
The opposition parties are threatening to block the deal, expressing concern that it may lead the government to raise taxes.
“The economy makes its own adjustments, and (no IMF deal) would lead to inflation, unemployment, a loss of investor confidence, higher interest rates and possible weakening of the currency,” Reuters quoted Alvarado saying.
These days, Costa Rica’s budget deficit is widening continuously, as the government spends more to reduce the economic impact on its citizens.
To generate cash, the government has decided to sell off a state-owned factory, a bank, and some landholdings. In addition, the finance ministry has already made proposals to increase income and property taxes.