Costa Rica: Preconditions for the Establishment of a Fiscal Rule that includes a Structural Fiscal Balance Component

This paper discusses whether the preconditions for implementing a fiscal rule that includes a structural fiscal balance component are met in Costa Rica. It concludes that from the 11 preconditions, the country does not meet one, and three others are fulfilled only partially: Costa Rica needs a tax reform in order to ensure debt sustainability; international reserves should be increased further; public infrastructure requires more investment; and some financial institutions need to be recapitalized to guarantee the soundness of the financial system.