New Credit Line Supports Costa Rica’s Remarkable Reforms

New Credit Line Supports Costa Rica's Remarkable Reforms

September 23, 2025

Precautionary arrangement signals Costa Rica's very strong policy frameworks and economic achievements, and sets the stage for further gains

In early June, the IMF approved a two-year Flexible Credit Line (FCL) for Costa Rica. This followed the Central American nation's years-long and ambitious reform agenda, which has helped to increase growth, lower debt, and reduce poverty, while also boosting international investor confidence.

The FCL is designed for countries with very strong economic fundamentals and institutional policy frameworks. It serves as a buffer during periods of heightened global uncertainty, offering access to liquidity if needed and signaling very strong policymaking to markets.

In an interview with IMF Country Focus, the Fund's Costa Rica team discussed the significance of the new credit line and how it supports the country's continued path toward sustainable and inclusive growth.

How has Costa Rica's economy evolved in recent years?

Varapat Chensavasdijai (head of the Costa Rica country team): Costa Rica started to implement an impressive reform agenda in 2015. Reforms included a fiscal rule that ties spending to GDP growth and debt levels, tax system modernization, and steps to strengthen the financial system and competition. These included submitting a bill to upgrade bank resolution and deposit insurance, a concrete step to strengthen the country's financial safety net, alongside efforts to cement central bank autonomy. A long-term effort to diversify the economy has begun to bear fruit, boosting exports of advanced manufactured goods (such as medical devices, electronics, and aerospace components) and business services (like IT and digital services, business process outsourcing, and call centers). A series of IMF lending facilities have supported Costa Rica's reform agenda since 2020.

The reforms have contributed to remarkable economic gains. Between 2021 and 2024-and despite the challenging global economic environment-annual GDP growth averaged 5 percent; public debt fell by 8 percentage points of GDP; and the poverty rate declined by 5 percentage points. The country also joined the Organization for Economic Cooperation and Development in 2021, a group of mostly advanced economies.

Costa Rica used four different IMF lending facilities since 2020. What does that tell us about the country's needs and the IMF's toolkit?

Alberto Behar (former senior economist): In April 2020, Costa Rica accessed emergency financing through the Rapid Financing Instrument (RFI) to address urgent balance of payments pressures. From 2021 to 2024, an Extended Fund Facility (EFF) supported fiscal reforms, monetary and financial stability, and inclusive growth. For instance, improving social program targeting, supporting job formalization, and encouraging women's participation and entrepreneurship. In parallel, from 2022 to 2024, the Resilience and Sustainability Facility (RSF) supported the country's climate agenda. In 2025, Costa Rica added a Flexible Credit Line (FCL), its fourth IMF arrangement over the past few years.

These programs show how IMF support evolved, from urgent balance of payments needs to precautionary measures and long-term stability. It's worth adding that Costa Rica is the first IMF member to go from a lending facility addressing actual balance of payments needs to an FCL within a year. This shift underscores the country has transitioned from stabilization to resilience. It also illustrates the Fund's agility in adapting its support to members' changing needs.

What led the Costa Rican authorities to request an FCL arrangement, and what does it signal about the country's economic fundamentals and policy strength?

Santiago Acosta-Ormaechea (former resident representative): After successfully completing the previous programs, Costa Rica requested the FCL to reinforce investor confidence in its very strong economic fundamentals and policy frameworks. This credit line provides insurance against external shocks amid heightened global uncertainty. It signals a continuous focus on fiscal responsibility, prudent monetary policy, and robust financial regulation. Access to this facility builds on years of close collaboration with the IMF, and reflects the country's commitment to maintaining very strong policies and resilience.

While Costa Rica doesn't intend to draw from the FCL, what does the country hope to achieve with it, and how might it benefit the broader population?

Santiago: By standing ready to provide financial assistance if needed, the FCL strengthens investor confidence and supports efforts to safeguard macroeconomic stability. It also helps align policies among Costa Rican authorities, legislators and other key stakeholders by encouraging continued reform efforts and dialogue, since access is reviewed every 12 months. Over time, we expect this commitment to spur growth, help lower financing costs, create jobs, and enable further reductions in poverty.

What do you see as Costa Rica's priorities going forward?

Varapat: With elections next year, the priority should be to maintain very strong policies and institutional frameworks that successive administrations have already upheld over recent years. It's important to continue reducing public debt, strengthening central bank independence, easing supply-side bottlenecks, and improving the legal framework for financial oversight and crisis management.