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Plan Fiscal Obligates Central
Bank to Reduce "Dollarization"
in Banking System
If the Plan Fiscal is adopted in
it's current state, the Banco
Central de Costa Rica (BCCR) -
the Central Bank - says it will
be obligated to reduce "dollar"
deposits at banks.
Chapter III, Article 34, of the
Plan Fiscal, calls for the
Central Bank to reduce losses
and reduce the amount of "dollarization"
in the banking system.
According to the president of
the Central Bank, Francisco de
Paula Gutiérrez, if the Central
Bank is able to reduce it's
losses it would lower inflation
and the need for the public to
maintain dollar accounts.
The Central Bank reports a loss
of ¢106.000 million colones
(some us$225 million dollars)
for the year 2004, mainly due to
operational systems that were
set up in the '80's and each
year gets bigger than revenues
generated by the Central Bank.
Currently, the Central Bank
makes up the difference with
putting more money in
circulation.
For his part, Federico Carrillo,
Ministro de Hacienda (Revenue
Minister) says that if his
Ministry gets more income (from
changes resulting from the Plan
Fiscal), it will absorb the
losses by the Central Bank.
If the losses by the Central
Bank are reduced, then it will
also reduce the level of
inflation and dollarization in
the economy, according to the
experts and a warning by the
International Monetary Fund.
Hacienda estimates that the Plan
Fiscal, if adopted as it is
today, will generate additional
revenue equal to 2% of the
internal production forecast for
2006.
The Plan Fiscal has been in
debate for some time and there
is no clear indication if and
when it will be approved.
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