Costa Rica: Sovereign Asset and Liability Management – Scoping Mission

This paper presents high-level summary technical assistance report on sovereign asset and liability management (SALM) for Costa Rica. Aided by a 36-month Extended Fund Facility in place since March 2021, Costa Rica’s reform efforts toward strong, inclusive, and sustainable growth are showing tangible results. A comprehensive SALM framework can have significant advantages over separate management of sovereign assets and liabilities. It allows for analysis of the financial characteristics of the whole balance sheet of the sovereign, identification of sources of costs and risks, and quantification of the correlations among these sources. Implementing a full SALM framework can be challenging, but countries have applied it with a range of scope and policy objectives. This balance sheet analysis is a first step to developing a consolidated sovereign balance sheet. The central bank of Costa Rica’s balance sheet has negative equity and significant USD assets and liabilities. Most state-owned enterprises are in reasonably good financial health and can fund some investment from their retained earnings, and the state-owned banks are profitable and liquid, and reflect dollarization in the economy.