The consequences are as you would expect: upward trend in interest rates because the state must meet its cash needs competing for credit with the productive sectors, and reduced state investment, especially in infrastructure, which compromises the ability of the economy to grow.
In an analysis of the issue in an article in Misfinanzasenlinea.com, Maria Morales describes how the fiscal deficit has evolved in recent years, and the varying economic prospects for Costa Rica depending on whether or not the tax reform bill is approved by the Legislative Assembly.
"Projections for the two year period of 2012 and 2013 establish an annual deficit for the Global Public Sector of 6.7 and 7.8% respectively, higher than in 2011, when it stood at 5.4 percent of GDP. This reflects the growing deterioration in Central Government, whose internal funding pressures are evident in the higher interest rates on the local market.
In the previous period, the debt balance reached a level of 9.3 billion colones (about 18 billion dollars), that is 47% of GDP. During that time, the government responded by meeting its responsibilities using national debt bonds and the use of part of the deposits held at the Central Bank of Costa Rica (BCCR). "
Source: Misfinanzasenlinea.com
More on this topic
December 2011
As of September 2011, Salvadoran government debt hit a new record, surpassing that of 1990, when it came to represent 50% of GDP.
From 1990 to 1998 the ratio of public debt to gross domestic product (GDP) decreased to 27%. Since then the ratio began to grow steadily and in 2009 it was once again 50%. Now. the ratio is 51.7%.
August 2011
In July, the difference between total revenue and expenditure was $87 million. The deficit does not include interest expenses, which amount to $527 million a year, 17.7% more than recorded in July 2010.
A press release by ALDESA reads:
“The July figures for revenues and expenditures by the Central Government are not very encouraging and continue to show the existence of harmful primary deficit.
May 2011
The fiscal deficit increased by 26.5% in the first 4 months of the year and has reached $733.3 million.
The amount is equivalent to 1.8% of Gross Domestic Product (GDP). In the same period in 2010, the amount was $579.8 million.
"We are seeing a larger financial deficit than the previous year in terms of GDP, which is consistent with the current projection that the deficit in 2011 would exceed 5% of GDP, " said the Finance Minister in office, Randall Garcia in an article publishes by ADN.es, "He reiterated the need for the country to adopt a tax reform ..."
November 2011
Failure to meet macroeconomic goals set by the IMF for 2011 would jeopardize the precautionary facility that has been negotiated.
The Salvadoran Foundation for Economic and Social Development (Fusades) has recommended the Government on several occasions to adjust the budget and make a fiscal pact.
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