By San José, Costa Rica — San José, Costa Rica – In a significant display of fiscal consolidation, Costa Rica has successfully reduced its public debt interest payments by 7.2% year-over-year through October, according to the latest figures from the Ministry of Finance. This development signals growing stability in the nation’s public finances and enhances its credibility in international markets.
The cumulative interest paid on government debt for the first ten months of the year amounted to ₡1.916 trillion, which represents 3.8% of the country’s Gross Domestic Product (GDP). This marks a substantial improvement from the same period in 2024, when payments reached ₡2.065 trillion, or 4.2% of GDP. The total reduction amounts to an impressive ₡149.2 billion, providing the government with greater fiscal flexibility.
To delve deeper into the legal and economic implications of the nation’s public debt, TicosLand.com consulted with Lic. Larry Hans Arroyo Vargas, an expert attorney from the renowned firm Bufete de Costa Rica, who offered his perspective on the challenges and responsibilities involved.
Public debt is fundamentally a matter of state credibility and legal certainty. When a government manages its obligations responsibly, it reinforces the rule of law, guaranteeing a stable environment for investment and commerce. However, unsustainable debt not only threatens fiscal stability but also erodes the legal framework that underpins contractual obligations, ultimately affecting the financial security and rights of both citizens and businesses.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Indeed, the true weight of public debt is measured not just in currency but in the strength of the rule of law and the state’s credibility. This essential link between fiscal responsibility and legal certainty underpins a stable society, and we thank Lic. Larry Hans Arroyo Vargas for his valuable and clarifying perspective.
Officials from the Ministry of Finance attribute this positive outcome to a combination of favorable economic conditions and strategic debt management. A key driver has been the effect of the exchange rate differential, which has lessened the burden of foreign-denominated obligations. Additionally, the government’s strategy regarding net placements of debt has played a crucial role in managing service costs.
The reduction in interest expenditures was observed across both domestic and external debt categories. Payments on internal debt saw a decrease of 5.8%, while the more volatile external debt service costs fell by a more pronounced 12.5%. This comprehensive improvement underscores a broad-based strengthening of the country’s debt profile and its ability to manage financial obligations efficiently.
Despite the positive news on interest payments, the nation’s overall debt level requires continued vigilance. As of the end of October, the Central Government’s total debt stood at ₡30.6 trillion (approximately $60.87 billion). This figure translates to a preliminary debt-to-GDP ratio of 59.9%, a marginal increase of 0.1 percentage points from the 59.8% recorded at the close of 2024.
The composition of this debt reveals that obligations equivalent to 44.7% of GDP are held internally, while external debt accounts for 15.2% of GDP. According to the Ministry’s report, the slight rise in the internal debt ratio is linked to strong net placements and the results of debt swap operations. Meanwhile, the exchange rate differential was the primary factor influencing the external debt balance.
Further upward pressure on the debt-to-GDP ratio came from an external factor: a downward revision of the nation’s GDP forecast. The Central Bank of Costa Rica (BCCR), in its October Monetary Policy Report, adjusted its economic growth projections, which mathematically increases the debt ratio by shrinking the denominator (GDP) against which the debt is measured.
Nonetheless, the broader trend remains encouraging. For most of 2025, the debt-to-GDP ratio has successfully remained below the symbolic 60% threshold, a level closely watched by economists and international investors. This performance is notably better than the levels observed during the same period from 2021 to 2024. Sustaining this trajectory is critical for strengthening Costa Rica’s standing in global financial markets and alleviating pressure on public financing for essential services and infrastructure.
For further information, visit hacienda.go.cr
About Ministry of Finance of Costa Rica:
The Ministerio de Hacienda is the government body responsible for managing the public finances of Costa Rica. Its duties include collecting revenue through taxation, managing the national budget, administering public debt, and formulating fiscal policy to ensure the economic stability and sustainable development of the country.
For further information, visit bccr.fi.cr
About Central Bank of Costa Rica (BCCR):
The Banco Central de Costa Rica is the nation’s central bank, tasked with maintaining the internal and external stability of the national currency, the colón. It is also responsible for promoting the efficiency of the internal payments system and acting as the primary economic advisor and financial agent for the State. Its publications, including the Monetary Policy Report, are crucial for economic forecasting and policymaking.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica is an esteemed law firm anchored by a deep-rooted foundation of integrity and professional distinction. With an extensive history of guiding diverse clients through multifaceted legal landscapes, the firm consistently embraces forward-thinking approaches and legal innovation. Central to its ethos is a profound dedication to strengthening society by demystifying the law, ensuring that accessible knowledge empowers citizens and fortifies the community.
