IMF
Executive Board Completes Second Review
Under Stand-By Arrangement with Costa Rica
The Executive Board of the International
Monetary Fund (IMF) completed this week the
second review of Costa Rica’s economic
performance under a program supported by a
15-month Stand-By Arrangement (SBA).
The authorities have indicated that they
will continue treating the arrangement as
precautionary.
The SBA was approved on April 13, 2009 for
US$780 million. Completion of the review
makes an additional US$65 million available
for disbursement, bringing the total
resources that are currently available to
Costa Rica under the arrangement to about
US$652.
Following the Executive Board’s discussion
on Costa Rica, Mr. Murilo Portugal, Deputy
Managing Director and Acting Chair, stated:
“Costa Rica’s performance under the Stand-By
arrangement with the Fund is commendable. An
economic recovery is gradually taking hold,
inflation has moderated to a historically
low level, and the financial sector has
remained sound. The authorities’ economic
program has helped cushion the impact of the
global downturn and is providing a solid
framework to support the recovery. Economic
policies will continue to strike a balance
between supporting domestic demand in the
near term and maintaining domestic and
external stability to foster sustained
growth over the medium term.
“Fiscal policy has provided timely support
to domestic demand in 2009, and the fiscal
program for 2010 allows room for some
additional stimulus in the early part of the
year. Afterwards, the authorities plan to
gradually unwind the fiscal stimulus as the
recovery of private demand takes hold.
“Inflation has continued to decline and the
exchange rate has moved toward the middle of
the currency band. These developments have
increased the central bank’s room for policy
maneuver, although upside risks to the
inflation outlook warrant maintaining a
cautious approach to monetary easing. The
more benign domestic and global environment
also provides an opportunity to further
modernize exchange rate and monetary
operations, and advance in the transition
toward inflation targeting.
“The banking sector has weathered the
cyclical downturn well, and liquidity and
solvency indicators remain adequate. Further
progress in the reform agenda remains
important to strengthen the financial sector
safety net, including the recapitalization
of the central bank and passage of
legislation to enable consolidated financial
sector supervision,” Mr. Portugal said. |
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