Costa Rica is getting support from the World Bank for its post-pandemic recovery efforts.
This comes as the multinational lending institution has officially announced its support for the process by approving a US$500 million loan for the Central American country. The main objective of the loan is to aid in improving family incomes, strengthening small- and medium-sized enterprises (SMEs) and fostering the growth of the island’s green economy.
The loan has a final maturity period of 19.5 years, including a four-year grace period and is based on the Secured Overnight Financing Rate (SOFR) interest rate.
The SOFR interest rate is a broad measure of the cost of borrowing cash overnight collateralised by Treasury securities.
Support from the World Bank through the loan is expected to play a vital role in Costa Rica’s journey towards economic recovery, fiscal stability, and sustainable development while addressing the challenges posed by the pandemic and external factors. Costa Rican Finance Minister Nogui Acosta is highlighting the significance of this support for the country and the World Bank’s trust in the government.
World Bank confidence in Costa Rican Government
According to him, “this new budget support loan demonstrates the World Bank’s confidence in the government’s commitment to inclusive and sustainable economic growth. The Costa Rican economy is emerging from the severe impact of the pandemic. However, adverse external conditions have presented us with new challenges that we must address in terms of economic reactivation and fiscal consolidation.”
The World Bank has outlined three key pillars that will be reinforced through this loan to facilitate economic growth. Firstly, it aims to safeguard jobs and incomes from the impact of COVID-19 and facilitate the recovery of small and medium-sized businesses.
This will involve implementing a combination of international shock response measures and reforms to enhance the efficiency and resilience of social protection. The loan will also contribute to improving public finances by enhancing tax collection, streamlining government spending, and enabling better management of public debt.
Additionally, it seeks to promote green growth and low-carbon development, emphasizing the adoption of clean technologies and the creation of a resilient, equitable, and climate-smart economy.
Challenge in poverty reduction/inequality
While acknowledging Costa Rica’s progress in environmental, economic, and social spheres, World Bank Country Manager for El Salvador and Costa Rica, Carine Clert pointed to the ongoing challenge of reducing poverty and inequality in the country.
He concluded by saying, “with this operation, we seek to underpin the Government of Costa Rica’s efforts to progress towards fiscal consolidation and investment in more ecological production systems, as well as helping to strengthen basic protective measures for the most vulnerable population, especially women.”