Costa Rica on Wednesday enacted a law that drastically cuts state contributions to political parties for the 2022 election campaign, as part of the country’s efforts to contain its ballooning budget deficit.
President Carlos Alvarado signed the “Law on Savings for the Political Campaign of 2022” (Ley de ahorro para la campaña política de 2022), which reduces the state contribution to parties from 0.19% of GDP to 0.08%, which would save the Treasury about $60 million.
The law will apply for the presidential and legislative elections of 2022 and for the municipal elections of 2024, according to the initiative approved by the Legislative Assembly (parliament).
“This signing represents the union of political forces in view of the common will to give the country a break in its public finances through savings,” Alvarado said during a ceremony at the Presidential House.
The law comes into effect as Costa Rica negotiates with the International Monetary Fund (IMF) for $1.75 billion in financing, in exchange for a program to contain the budget deficit, which has reached 8.3% GDP in 2020 following the Covid-19 pandemic.
The country intends to contain the budget deficit through a series of spending cuts and new revenues, such as reduced contributions to political parties and taxes on luxury homes and income generated by Costa Ricans in the stranger.