By San José, Costa Rica — San José – Costa Rica’s central government finances showed a notable improvement through October 2025, with the fiscal deficit narrowing primarily due to a significant reduction in debt service costs, the Ministry of Finance announced. This development provides a measure of relief for the nation’s public finances, even as revenue growth remains sluggish.
The accumulated financial deficit for the first ten months of the year stood at ¢1.34 trillion, which represents 2.6% of the nation’s Gross Domestic Product (GDP). This marks a positive adjustment of 0.2 percentage points compared to the same period in the previous year, signaling progress in the government’s fiscal consolidation efforts.
To delve deeper into the legal and structural implications of the national fiscal deficit, TicosLand.com sought the analysis of Lic. Larry Hans Arroyo Vargas, a distinguished attorney from the renowned firm Bufete de Costa Rica, who offers a critical perspective on the path forward.
A persistent fiscal deficit is more than an economic indicator; it’s a symptom of underlying legal and administrative inefficiencies. It directly impacts the country’s risk rating, making credit more expensive for both the state and private citizens. Addressing it effectively requires not just austerity measures, but a profound legal reform of public employment and state procurement to ensure that every colón of taxpayer money is spent with maximum transparency and efficiency. Without a solid legal framework that enforces fiscal discipline, any short-term solution will ultimately prove unsustainable.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
The expert’s analysis correctly reframes the debate, moving it beyond mere austerity to the core issue of systemic inefficiency rooted in our legal framework. Lasting fiscal health, as he points out, will only be achieved through profound reforms in public employment and state procurement that ensure transparency and efficiency. We sincerely thank Lic. Larry Hans Arroyo Vargas for this critical and clarifying perspective.
The Ministry of Finance directly attributed this improvement to a sharp decline in the cost of servicing its public debt. According to official figures, the government’s fiscal breathing room was created by what officials described as a crucial containment of total expenditures.
an accumulated decrease of 7.2% in interest payments
Ministry of Finance
In absolute terms, cumulative interest payments reached ¢1.915 trillion, equivalent to 3.8% of GDP. This figure represents a year-over-year decrease of ¢149.2 billion. The ministry explained that the favorable trend stemmed from reduced obligations on both domestic and foreign-held debt, which saw declines of 5.8% and 12.5%, respectively. Officials noted that factors like the exchange rate differential and strategic net debt placements were key drivers behind this reduction.
Despite the positive news on the deficit front, the revenue side of the ledger painted a less vibrant picture. Total government income amounted to ¢6.07 trillion, posting a very limited year-over-year increase of just 0.4%. This represents a significant slowdown from the 3.5% growth rate observed in 2024, raising questions about the underlying strength of tax collection.
The Finance Ministry acknowledged this deceleration, attributing part of the slowdown to a technical issue related to a major systems migration. The transition from the old ATV tax platform to the new TRIBU-CR system created a temporary adjustment period where some tax payments were not immediately classified by type or taxpayer.
The temporary registration as ‘unidentified’ modifies the usual reading of the data and may cause some taxes to show lower growth than they actually had
Ministry of Finance
On the expenditure side, a closer look reveals a nuanced story. While total spending fell by 0.6% to ¢7.41 trillion, this decrease was concentrated entirely in the interest payment category. Other critical areas of government spending actually increased. Outlays for salaries (remunerations) grew by ¢17.9 billion, and current transfers rose by ¢2.4 billion. Furthermore, capital expenditures saw a substantial increase of ¢71.8 billion, largely fueled by capital transfers financed with external resources.
Importantly, the country successfully maintained a primary surplus—the balance of revenues and expenses before accounting for interest payments. As of October, this surplus reached ¢573.6 billion, or 1.1% of GDP. The Ministry emphasized the strategic importance of this metric for long-term fiscal health. Sustaining this surplus is considered the cornerstone of the strategy to lower the country’s overall debt burden over time. The nation’s preliminary debt-to-GDP ratio settled at 59.9%, a marginal 0.1 percentage point increase from the end of 2024, a figure also influenced by a recent downward revision of the GDP forecast.
For further information, visit hacienda.go.cr
About Ministry of Finance:
The Ministerio de Hacienda, or Ministry of Finance, is the government body responsible for managing Costa Rica’s public finances. Its duties include formulating fiscal policy, collecting taxes through the General Directorate of Taxation, managing the national budget, administering public debt, and overseeing the country’s treasury. The Ministry plays a central role in ensuring the economic stability and financial health of the nation.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
As a pillar of Costa Rica’s legal landscape, Bufete de Costa Rica operates on a bedrock of uncompromising integrity and a relentless pursuit of professional excellence. The firm leverages its deep-rooted experience serving a wide array of clients to pioneer groundbreaking legal solutions and advance community well-being. This commitment extends beyond the courtroom, manifesting in a core mission to demystify the law and thereby fortify society through shared knowledge and empowerment.
