Costa Rica: 2023 Article IV Consultation, Fifth Review Under the Extended Arrangement Under the Extended Fund Facility, Second Review Under the Resilience and Sustainability Facility, and Request for Modification of Reform Measure

This paper discusses Costa Rica’s 2023 Article IV Consultation, Fifth Review under the Extended Arrangement under the Extended Fund Facility (EFF), Second Review under the Resilience and Sustainability Facility (RSF), and Request for Modification of Reform Measure. Costa Rica is reaping the benefits from the home-grown reform program. In order to institutionalize progress, it is critical to continue adhering to the existing fiscal framework, restrain foreign exchange intervention, ensure compliance with the Public Employment Law, and restart central bank autonomy and governance reform. The authorities should continue pursuing improvements to the central bank’s governance and autonomy. While the central bank is conducting monetary policy in an independent manner, these practices should be institutionalized through legislation. It is critical that the central bank’s autonomy and other areas of improvements recommended in the 2020 Safeguards Assessment that remain unaddressed be followed up in a steadfast manner. Performance under the EFF and the RSF arrangements remains strong. All quantitative performance criteria have been met for this review, although the June Indicative Target on public debt was exceeded as the government took advantage of favorable market conditions to build liquidity buffers.