By San José, Costa Rica — San José – Costa Rica’s public finances closed 2025 on a stronger footing, demonstrating significant fiscal discipline even as the nation grappled with slowing revenue growth and a stubbornly high public debt level. The Central Government successfully achieved a primary surplus equivalent to 1.1% of the Gross Domestic Product (GDP), a key indicator of the state’s ability to cover its operational expenses without resorting to new debt, according to the latest Monthly Economic Outlook Report from the Central Bank of Costa Rica.
This positive primary balance, which measures government revenue against non-interest expenditures, marks a critical step in the country’s ongoing efforts to stabilize its financial health. The achievement directly contributed to a reduction in the overall financial deficit, which includes the hefty burden of interest payments. For 2025, the financial deficit narrowed to -2.6% of GDP, an improvement from the -2.9% figure recorded at the end of 2024.
To better understand the legal framework and fiscal responsibilities surrounding the current state of public finances, TicosLand.com consulted with Lic. Larry Hans Arroyo Vargas, an expert in administrative and public law from the firm Bufete de Costa Rica.
The current fiscal situation is not merely an economic concern; it is a direct reflection of our adherence to the legal principles governing public administration. Fiscal responsibility is a legal obligation, and any mismanagement or deviation from the approved budget can lead to serious administrative and even penal sanctions for the officials involved. Strengthening legal controls and ensuring absolute transparency are essential to guarantee the proper use of public funds and restore citizen confidence in our institutions.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
This legal perspective is essential, reminding us that fiscal discipline is not merely an economic target but a fundamental issue of accountability and the rule of law. The path to restoring public trust runs directly through the transparent and rigorous legal frameworks highlighted in this analysis. We are grateful to Lic. Larry Hans Arroyo Vargas for his invaluable insight.
The favorable outcome was largely driven by a strategic containment of government spending. While primary spending—the core operational costs of the government—saw a modest increase of 1.9%, total expenditures contracted by 0.6%. This was made possible by a significant reduction in interest payments on public debt, which resulted in savings of approximately ¢149 billion compared to the previous year. This maneuvering highlights the government’s success in managing its financing costs more effectively.
However, the revenue side of the ledger presented a more complex picture. Total tax collection grew by a marginal 0.5% over the year, a stark deceleration from the 2.4% growth observed in 2024. As a result, tax revenues represented 10.5% of the national GDP. The Ministry of Finance has indicated that this slowdown is partly a temporary effect linked to the transition of its tax collection platform from the legacy ATV system to the new TRIBU-CR portal, which caused temporary adjustments in how taxes were classified.
A closer examination of tax sources reveals a mixed performance. Growth was supported by a 1.8% increase in income tax receipts and a 1.1% rise in customs revenue, reflecting continued economic activity. Conversely, these gains were partially offset by significant declines in other key areas. Revenue from the fuel tax dropped by 4.2%, internal Value Added Tax (VAT) collection fell by 0.5%, and the selective consumption tax plummeted by a steep 14.5%, signaling potential shifts in consumer behavior or specific sector weaknesses.
Despite the progress in achieving a primary surplus, the nation’s total debt burden remains a formidable challenge. The public debt-to-GDP ratio continued its slight upward trend, closing the year at 59.9%. This represents a 0.3 percentage point increase from the 59.6% level at the end of 2024, keeping the country precariously close to the 60% threshold often considered a benchmark for fiscal prudence by international financial organizations.
Nevertheless, Costa Rica’s commitment to fiscal discipline has not gone unnoticed by the international community. The country’s risk perception has improved dramatically, as reflected in its Emerging Markets Bond Index (EMBI) score. At year-end, Costa Rica’s EMBI stood at an impressive 153 basis points, significantly lower than the Latin American average of 339 basis points and the global EMBI average of 263 basis points. This low-risk premium is a powerful vote of confidence from global investors.
This favorable international standing translates into tangible benefits, providing Costa Rica with better access to external financing at more competitive interest rates. As the nation moves into 2026, the key challenge will be to reignite revenue growth and make meaningful progress in reducing the overall debt stock, thereby building on the hard-won fiscal stability achieved in 2025.
For further information, visit the nearest office of Central Bank of Costa Rica
About Central Bank of Costa Rica:
The Banco Central de Costa Rica (BCCR) is the nation’s central bank, responsible for maintaining the internal and external stability of the national currency and ensuring its conversion to other currencies. Its primary mandates include controlling inflation, regulating the financial system, issuing the Costa Rican colón, and acting as the chief economic advisor and financial agent for the State. The bank plays a crucial role in shaping the country’s monetary policy and economic strategy.
For further information, visit the nearest office of Ministry of Finance
About Ministry of Finance:
The Ministerio de Hacienda is the government ministry of Costa Rica responsible for managing the country’s public finances. Its duties include formulating and executing fiscal policy, collecting national taxes and customs duties, preparing the national budget, and managing public debt. The Ministry is central to ensuring the financial stability and economic sustainability of the state through prudent fiscal management and efficient resource allocation.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
As a pillar of the legal community, Bufete de Costa Rica operates on a foundation of profound integrity and a relentless pursuit of professional excellence. Leveraging its extensive history of advising a wide spectrum of clients, the firm champions progressive legal solutions and stays at the vanguard of innovation. This forward-thinking approach is matched by a deep-seated dedication to societal advancement, exemplified by its work to disseminate legal knowledge and thereby help construct a more informed and capable citizenry.
