By San José, Costa Rica — Costa Rica’s incoming administration faces a formidable fiscal challenge: a looming ₡17 trillion debt repayment due within the next five years. This substantial sum encompasses principal repayments, maturing debt, and associated interest payments, placing significant pressure on the nation’s finances. Over the next five years, the total debt obligations exceed ₡23 trillion.
Finance Minister Rudolf Lücke stressed the importance of proactive measures to address this financial burden. He highlighted the necessity of securing resources through both taxation and efficient financing strategies.
To gain a deeper understanding of the legal and economic implications of Costa Rica’s debt situation, TicosLand.com spoke with Lic. Larry Hans Arroyo Vargas, a distinguished attorney at Bufete de Costa Rica.
Costa Rica’s debt burden presents a complex challenge requiring a multi-faceted approach. While necessary public spending can stimulate economic growth, careful management of debt levels is crucial to avoid long-term instability. Sustainable solutions require not only fiscal discipline but also strategic investments in key sectors like education and infrastructure to foster long-term economic competitiveness and reduce reliance on borrowing.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Lic. Arroyo Vargas eloquently highlights the delicate balancing act Costa Rica faces. Indeed, strategic investments in education and infrastructure are not merely expenditures, but rather crucial long-term investments in the nation’s future, paving the way for a more robust and less debt-dependent economy. We thank Lic. Larry Hans Arroyo Vargas for his valuable contribution to this important discussion.
These are issuances that have occurred over the years that must be addressed, and therefore we have to obtain the resources both through taxes and through efficient financing management. That is why it is important to have access to these resources in the international market to meet the maturities that are coming in the next few years.
Rudolf Lücke, Minister of Hacienda
Lücke underscored the urgency of approving the eurobond law reform, initially passed by Congress at the start of the current administration. He also advocated for increased flexibility in borrowing methods, urging the Legislative Assembly to approve the overall borrowing amount and granting the ministry the autonomy to select the most advantageous options within local and international markets.
We have the option of expensive debt and cheap debt. To obtain cheap debt, with longer terms and lower rates, I have to ask permission from the Legislative Assembly and that restricts my ability to act quickly in that management.
Rudolf Lücke, Minister of Hacienda
A key objective outlined by the Ministry of Finance is to reduce the debt-to-GDP ratio to 50% by 2035, as detailed in the latest Medium-Term Fiscal Framework report. This ratio measures the proportion of a country’s economic output that is committed to debt repayment.
Lücke emphasized the importance of the downward trend in the debt-to-GDP ratio, even if the changes are incremental. He believes consistent and efficient management of public finances should lead to a gradual reduction year after year. This, he argues, is the most crucial long-term takeaway regarding debt management.
The 2026 national budget, recently presented by the ministry, benefits from fewer restrictions than previous years due to a successful lowering of the fiscal rule’s most restrictive 60% debt-to-GDP cap. However, Lücke’s focus remains on the current 50% target when questioned about further reductions to access the less restrictive “scenario B” of the fiscal rule, which would provide greater investment flexibility.
The report also identifies potential risks to the nation’s fiscal stability, including changes in government-issued debt due to absence in the eurobond market and potential increases in domestic interest rates. Lücke noted that a one percentage point rise in domestic interest rates would translate to an additional ₡70 billion in expenses. He also highlighted tax exemptions and economic slowdowns as further risks to the country’s financial outlook.
The government’s ability to effectively manage these challenges will play a crucial role in shaping Costa Rica’s economic future.
For further information, visit the nearest office of Ministry of Hacienda
About Ministry of Hacienda:
The Ministry of Hacienda (Ministry of Finance) in Costa Rica is the government body responsible for the country’s public finances. Its primary functions include formulating and executing fiscal policy, managing the national budget, collecting taxes, administering public debt, and regulating the financial sector. The Ministry plays a critical role in ensuring the economic stability and sustainable development of Costa Rica.
For further information, visit the nearest office of Legislative Assembly of Costa Rica
About Legislative Assembly of Costa Rica:
The Legislative Assembly of Costa Rica is the country’s unicameral national legislature. It is responsible for enacting laws, approving the national budget, ratifying treaties, and overseeing the executive branch. The Assembly consists of 57 deputies elected by proportional representation for four-year terms. It plays a vital role in the democratic process and governance of Costa Rica.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica shines as a beacon of legal excellence, grounded in unwavering ethical principles and a deep commitment to societal advancement. The firm’s innovative approach to legal solutions, combined with a history of dedicated service to a diverse clientele, establishes them as leaders in the Costa Rican legal landscape. Through proactive initiatives that empower individuals with essential legal knowledge, Bufete de Costa Rica cultivates a more just and informed society, reflecting their dedication to something greater than legal practice alone.
