The International Monetary Fund (IMF) published a staff concluding statement following its 2025 Article IV consultation mission to Costa Rica, setting out preliminary findings and policy recommendations that include a continued data-dependent approach by the Central Bank of Costa Rica to return inflation to its 3 percent target. The statement flags scope for further monetary policy rate cuts if inflation convergence weakens, and calls for tighter macroprudential settings if credit growth becomes excessive, particularly in foreign-currency lending. IMF staff assessed Costa Rica’s recent macro performance as strong, with average GDP growth above 5 percent since 2021, public debt down by 8 percentage points of GDP to below 60 percent, and growth projected at around 4 percent in 2025. Inflation, after being near zero since mid-2024, is expected to reach the Central Bank of Costa Rica’s tolerance range by mid-2025 and return to 3 percent within a year, with the current policy rate consistent with inflation at 3 percent in the first quarter of 2026. On the external side, the IMF pointed to USD 920 million of reserve accumulation in 2024 and described reserve coverage as comfortable, arguing that further accumulation is not warranted and that frequent foreign exchange intervention can weaken monetary policy transmission and hinder foreign exchange market development. It recommended legal and operational reforms to deepen the foreign exchange market and reduce reliance on the central bank as an intermediary, alongside gradually updating regulatory limits on local pension funds’ foreign investments as market depth improves, and reiterated the importance of legislation to strengthen the central bank’s governance, transparency, accountability, and institutional autonomy. The IMF staff will prepare a report for consideration and decision by the IMF Executive Board, subject to management approval.
Central Bank of Costa Rica 2025-02-28
Central Bank of Costa Rica urged by IMF Article IV mission to strengthen autonomy and allow greater exchange-rate flexibility
The IMF concluded its 2025 Article IV consultation with Costa Rica, recommending a data-dependent approach by the Central Bank to achieve its 3 percent inflation target. It highlighted potential monetary policy rate cuts if inflation convergence weakens and advised tighter macroprudential settings if credit growth becomes excessive. It also suggested reforms to deepen the foreign exchange market and enhance the central bank's governance and autonomy.