Costa Rica requests $1.75 billion in IMF financial assistance

FILE PHOTO: A man looks at his cell phone while a pizza restaurant looks closed after health authorities reverse the measures of reopening following the increase in cases of the coronavirus disease (COVID-19) in San Jose, Costa Rica July 13, 2020. REUTERS/Juan Carlos Ulate

SAN JOSE (Reuters) - Costa Rica’s government said on Saturday it has requested $1.75 billion in financial assistance over three years from the International Monetary Fund as the Central American nation’s economy has been reeling from the coronavirus pandemic.

On July 12, Costa Rican President Carlos Alvarado said his administration would begin negotiations with the IMF to access a financial aid package to help offset the economic blow from COVID-19. Details about the size of the aid package were not disclosed at the time.

In a letter dated Aug. 29 and addressed to IMF Managing Director Kristalina Georgieva, Costa Rica’s central bank president Rodrigo Cubero and finance minister Elian Villegas requested financial aid “in the form of a 3-year arrangement under the Extended Fund Facility,” equivalent to $1.75 billion.

“Despite our proactive policy efforts, the combined impact of the global shock and domestic containment measures on our country’s balance of payments and fiscal account is proving much sharper and protracted than expected, amid a resurgence in COVID-19 cases and a deeper contraction than initially envisaged,” the letter said.

The financial aid aims to offset diminishing government revenue as the 2020 fiscal deficit looks set to exceed 9.0% of the gross domestic product, and the central bank’s debt is seen reaching nearly 70% of GDP, according to the letter.

The central bank forecasts Costa Rica’s economy to contract by 5% in 2020, with only a gradual recovery over the medium term.

Reporting by Alvaro Murillo; Writing by Anthony Esposito; Editing by David Gregorio