LatinNews Daily - 07 January 2021

In brief: Costa Rica confirms date for new talks with IMF

* Costa Rica’s finance ministry has confirmed that formal conversations with the International Monetary Fund (IMF) will begin on 11 January regarding an agreement for an Extended Fund Facility (EFF) to address the impact of the coronavirus (Covid-19) pandemic. According to the finance ministry, the conversations will “address policies that the country needs to guarantee the sustainability of its public finances in the medium and long term, and support inclusive and sustainable growth”. In September 2020, Costa Rica’s President Carlos Alvarado presented the government’s first proposal to begin negotiating a US$1.75bn three-year financial assistance programme with the IMF. However, this proved hugely contentious due to the inclusion of proposed tax rises. After nationwide protests, the government was forced to rescind this proposal and come up with alternatives. In its latest (1 December 2020) report, the Organisation for Economic Co-operation and Development (OECD) forecast that Costa Rica’s GDP would contract by 5.6% in 2020. The OECD noted that this contraction has led to a significant loss of government revenue, exacerbating an “already vulnerable fiscal situation”. It expected the fiscal deficit to widen to around 9.5% GDP in 2020.

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