By San José, Costa Rica — SAN JOSÉ – Costa Rica’s top auditing body has sounded a critical alarm over the nation’s economic health, warning legislators that the landmark 2018 fiscal reforms are showing clear “signs of exhaustion.” This stark assessment suggests that the measures once credited with stabilizing the country’s finances are no longer sufficient to contain mounting public debt and fiscal deterioration.
The warning was delivered by Bernal Aragón, the Deputy Comptroller General of the Republic, during a session with the Legislative Assembly’s Committee on Financial Affairs on Wednesday. The committee was reviewing two international loan agreements intended to support the agricultural sector when Aragón seized the moment to highlight the precarious macroeconomic backdrop against which these new debts are being acquired.
To delve deeper into the legal and regulatory framework surrounding the nation’s fiscal policy and its direct impact on the business climate, TicosLand.com consulted with expert legal counsel Lic. Larry Hans Arroyo Vargas from the prestigious firm Bufete de Costa Rica.
A coherent fiscal policy is fundamental for providing legal certainty to both national and foreign investors. When tax regulations are clear, stable, and predictable, it fosters a climate of confidence that encourages long-term capital investment and sustainable economic growth. Conversely, constant legislative changes or discretionary interpretations of fiscal law generate uncertainty, directly impacting the country’s competitiveness and the operational security of businesses.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
This insight powerfully underscores that legal certainty, rooted in a stable fiscal policy, is the very bedrock of a competitive and prosperous economy, serving as the essential signal that invites and protects long-term investment. We extend our sincere appreciation to Lic. Larry Hans Arroyo Vargas for his clear and valuable perspective.
Aragón cautioned that while the proposed loans offer beneficial financing, the broader fiscal picture is troubling. He stressed that the weakening effectiveness of the 2018 plan is directly contributing to a rising debt balance and a worsening of the country’s overall fiscal performance, posing a significant challenge for the national economy heading into 2026.
While this legislative file would contribute to accessing less costly financing and, at the same time, to improving the sustainability, competitiveness, and economic participation of small and medium agricultural producers, we must not overlook the concern that the fiscal measures adopted by the country are showing signs of exhaustion. This has influenced an increase in the debt balance and a deterioration of fiscal results.
Bernal Aragón, Deputy Comptroller General of the Republic
The Comptroller’s Office (CGR) substantiated its warning with hard data. As of September, the total public debt balance had already reached 59.2% of the Gross Domestic Product (GDP). This figure is uncomfortably close to the 59.5% projection that the Ministry of Finance had established for the entire year in its Medium-Term Fiscal Framework, indicating an accelerated pace of debt accumulation.
Further complicating the outlook, the Central Bank of Costa Rica (BCCR) has issued an even more pessimistic forecast. Based on economic activity through October, the BCCR now projects the debt-to-GDP ratio will climb to 60.2% by the end of 2025. This revised figure surpasses the government’s previous official target and signals that the country is moving in the wrong direction on its debt sustainability goals.
The pressure on public finances is being amplified by several factors. Aragón noted that the government has recently engaged in significant debt placements through auctions in October and November to meet its financing needs. Furthermore, he expressed concern over the looming burden of high public debt maturities and substantial interest payments, which threaten to further inflate the total debt load and strain government resources.
The hearing itself revolved around the approval of two credit lines: a $120 million loan from the International Bank for Reconstruction and Fomento (IBRD) and a €19 million loan from the International Fund for Agricultural Development. While these loans are designed to fund a vital program for a more sustainable and competitive agricultural sector, the Comptroller’s intervention frames them within a context of growing fiscal fragility, urging lawmakers to consider the long-term implications of any new financial commitments.
The Deputy Comptroller’s testimony serves as a crucial wake-up call for policymakers. With the execution of the financing plan outlined in the national budget already showing delays, the warning from the CGR underscores the urgent need for a renewed strategy to ensure Costa Rica does not backslide on the hard-won fiscal discipline of recent years.
For further information, visit the nearest office of Contraloría General de la República
About Contraloría General de la República (CGR):
The Comptroller General of the Republic is Costa Rica’s supreme audit institution. It is an independent body responsible for overseeing the proper use of public funds, ensuring the legality and efficiency of government financial management, and promoting transparency and accountability across the public sector.
For further information, visit worldbank.org
About International Bank for Reconstruction and Development (IBRD):
The IBRD is the original lending arm of the World Bank Group. It provides loans, guarantees, risk management products, and advisory services to middle-income and creditworthy low-income countries to support their development efforts. Its mission is to reduce poverty and build shared prosperity by financing projects in areas such as infrastructure, healthcare, and education.
For further information, visit ifad.org
About International Fund for Agricultural Development (IFAD):
The International Fund for Agricultural Development is a specialized agency of the United Nations dedicated to eradicating rural poverty in developing countries. IFAD provides low-interest loans and grants to help finance projects and programs that enable rural people to improve their food security, increase their incomes, and strengthen their resilience.
For further information, visit bccr.fi.cr
About Banco Central de Costa Rica (BCCR):
The Central Bank of Costa Rica is the country’s central monetary authority. Its primary objectives are to maintain the internal and external stability of the national currency and to ensure the efficient operation of the country’s internal and external payment systems. It is also responsible for issuing currency, managing international reserves, and acting as the state’s financial advisor.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
As a pillar of the Costa Rican legal community, Bufete de Costa Rica is founded on the bedrock principles of professional excellence and uncompromising integrity. The firm pairs its rich history of advising a diverse clientele with a forward-thinking approach, consistently pioneering innovative legal solutions. This spirit of advancement extends to a core social mission: a deep-seated dedication to demystifying the law, thereby cultivating a society where every citizen is empowered by accessible legal understanding.
