Costa Rica Cuts 2027 Budget by 3.1% as Debt Stays Above 60% of GDP

Costa Rica’s government has sent Congress a 2027 budget that is smaller than this year’s plan, even as debt continues to exceed 60% of economic output. The proposed budget totals 12.4 trillion colones, or about $27 billion, a 3.1% reduction from 2026.

Debt payments consume 40% of the planned funds. Public debt stood at 61.1% of gross domestic product in the first half of 2026 and is expected to remain above 60% in 2027. It has stayed above that level since 2020, except in 2024, when it reached 58.9% of GDP.

The proposal anticipates government revenue growth of just 2.3%. It projects economic growth of 3.4% in 2026 and 3.5% in 2027, alongside fiscal deficits of 4.62% and 4.38% of GDP respectively. The government says 62.3% of the budget will be financed through its own revenue and 37.7% through debt.

The Education Ministry would receive the largest allocation, equivalent to 4.9% of GDP, although its nominal budget would fall 0.7%. Funding would also decline for the judiciary, by 1.9%, the Security Ministry, by 1.7%, and the Justice Ministry, by 2.5%.

The cuts come amid repeated criticism of the judiciary by the executive branch under President Laura Fernández and her predecessor Rodrigo Chaves, now serving as finance and presidency minister. The government has blamed the judiciary for releasing criminals and for the rise in drug trafficking and related violence. The ministries of Finance, the Presidency, Science, Technology and Telecommunications, and Health are among the few institutions set to receive more money. Hacienda has urged lawmakers to remove tax exemptions, strengthen anti-smuggling tools, reduce the size of institutions, cut spending on luxury pensions and rent, review transfers to public universities and municipalities, and secure cheaper financing with better terms.

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luxury pensions