Obtaining financing abroad for central government expenses is the goal of Nogui Acosta, Minister of Finance
If the State seeks money in the local market to finance operations, interest rates will increase
If the government fails to place ¢2.7 trillion in the best possible way this year, it will generate pressure on interest rates, both in dollars and colones, which will affect debtors.
In the last year, interest rates have drowned the finances of thousands of families, since the Central Bank has promoted their increase to control inflation.
Read more: Mónica Segnini: “Reducing public debt must be a priority for the next government”
However, since the prices of goods and services have been declining for four months, it is expected that they will no longer move upwards.
Read more: Respite for the Treasury? Maximum target for the sale of internal debt bonds is at 81%
In this sense, the government of Rodrigo Chaves could also help so that the loan installments of families and companies do not rise.
For this, it will be necessary to seek financing abroad to pay for central government expenses, instead of looking for money in the domestic market.
During the first semester, internal debt titles for ¢1.3 trillion were placed, of which ¢428 billion have already been obtained. For the second semester, ¢1.4 billion will be placed.
“The impact of this indebtedness will depend on where it is obtained, if the majority is local, interest rates will rise and inflation will fall, but if it is placed abroad, the exchange rate could rather appreciate,” said Gerardo Corrales, Economist from Economy Today.
Internal debt bond auctions, both in colones and in dollars, and debt swaps are some of the internal financing strategies available to the government to finance itself.
Two-year term Monetary Stabilization Bonds will be offered through monthly auctions.
“What these debt forecasts do is generate more stability for the market because they allow it to go from expensive to cheap debt and national bonds are doing very well, even better than others in Latin America. This allows them to deflate the pressure on interest rates and beat other commitments”, said Daniel Suchar, financial analyst.
The Treasury’s financing strategy will be parallel to the benefits that the issuance of foreign debt bonds (Eurobonds) will bring, as well as financing with multilateral organizations.
Last year, the government invested 64% of national production to cover its financing needs and this projection was made for this year, which will be reviewed next June.
A good moment
Costa Rica is at a good time to try to replace expensive debt with cheap ones, affirm economists consulted by LA REPÚBLICA.
Greivin Salazar
Economist
A
The options must be carefully evaluated, given precisely the process of rising interest rates at the international level, mainly in the United States, but without a doubt, any effort made is positive to replace expensive and short-term debt with debt relatively cheaper and with less compromising terms.
Mónica Segnini
Chairwoman
National Competitiveness Council
Actions must certainly be taken to allow a more efficient administration of the debt portfolio, such as reducing the proportion of liabilities in variable rates or in dollars, as well as a more efficient management of the Central Government’s income/expense ratio. The containment of spending, without this implying the reduction of the budget in key areas such as education, health or security, should be prioritized in the budget discussion in the coming years.
