Fiscal Reform in Sight for Costa Rica Following Pressure From the IMF

• Costa Rica's fiscal revenues are projected to remain subdued in 2026, primarily depressed by lower tax receipts – particularly from customs – alongside sluggish sales tax collections during the first quarter. This fiscal underperformance has subsequently drawn concern from the International Monetary Fund (IMF).
• Official data from the Costa Rican Central Bank showed a 10.8% decrease in overall fiscal revenues in March 2026, the third-lowest year-on-year (YoY) performance of the past three years and a -3.5% cumulative YoY growth. The decrease is mostly explained by the appreciation of the Costa Rican Colón against the U.S. Dollar, along with softer domestic demand, which has reduced sales tax collections.
• Modest performance of tax collections for the year was already expected, with a goal of 2.2% growth in tax collections set in the 2026 government budget. Still, current performance falls below the already pessimistic expectations for this year.
• This unfavourable revenue performance also caught the attention of multilateral organisations, particularly the IMF. Following its yearly Article IV revision of the Costa Rican economy, the IMF flagged the decline in tax collection and issued policy recommendations to the Costa Rican authorities, underscoring the urgency to adopt revenue-enhancing measures. Specifically, the Fund urged the government to increase revenues and manage public debt to ensure sufficient resources for capital investments and key spending priorities such as education, health, security and social transfers.
• While the IMF has less direct leverage on the Costa Rican government than it did under the Extended Fund Facility (EFF) programme in place between 2021 and 2024 (that conditioned disbursements of the programme on meeting specific fiscal goals), the current US$1.5Bn flexible credit line still requires the Costa Rican authorities to demonstrate "solid macroeconomic fundamentals" and increases the need to address IMF's macroeconomic concerns on the country.
• BMI expects the government's response to stop short of tax hikes. Shortly after the IMF published its concluding statement, authorities announced plans to revise fiscal-related regulations, outlining a framework of measures to address the revenue shortfall and revisit existing tax benefits. Finance Minister Rodrigo Chaves ruled out any tax hike, indicating that instead the proposal would focus on combating tax evasion, contraband and alleged income tax fraud. Revisions to tax benefits on basic food basket products are also expected, which would likely raise consumer prices and impact the purchasing power of Costa Rican households.
• That said, the draft of these fiscal-related reforms is still in early stages and is expected to reach the Executive Cabinet in July 2026, reflecting downside risks to fiscal revenues and overall public finances, while pressing the government to continue with limited spending policies

(Source: BMI, A Fitch Solutions Company)