Costa Rica Second Fiscal and Decarbonization Management DPL

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The development objectives of the Second Fiscal and Decarbonization Management Development Policy Loan in Costa Rica are to support Costa Rica's program to: (i) protect people’s income and jobs from the impact of COVID-19 and foster small and medium enterprise recovery; (ii) reinforce fiscal sustainability in the aftermath of COVID-19; and (iii) lay out the foundations for a strong post-COVID-19 recovery by promoting green growth and low-carbon development. This operation supports Costa Rica’s efforts to navigate a prolonged crisis and to lay the foundations for an efficient and sustainable recovery. Pillar A supports measures to improve the targeting and coverage of social assistance programs and to protect jobs and SMEs affected by COVID-19. It also supports reforms to strengthen the business environment and to advance an efficient recovery by improving insolvency procedures. Pillar B supports Costa Rica’s continued fiscal consolidation based on: (i) improving budgetary planning and spending controls; (ii) containing the public wage bill; and (iii) improving debt management. Finally, Pillar C contributes to building a solid foundation for green, low carbon, and climate-smart growth by: (i) strengthening data systems for informing and monitoring low carbon initiatives, and establishing carbon market mechanisms; (ii) introducing price-signals and reforms that increase investments in greener/low-carbon technologies and production systems; and (iii) improving institutional coordination and transparency in resource use. Overall, the supported reforms are expected to be positive or neutral from both a distributional and environmental perspective.