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Costa Rica public finances: the budget cycle, the fiscal rule, debt and the 2027 budget

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Last verified: 2026-10-29 · Status: Changing

The Constitution requires a balanced, one year budget submitted by 1 September and approved by 30 November, bars the Assembly from adding spending without new revenue, and since 2019 requires multiyear budgeting and fiscal sustainability. Ley 9635's fiscal rule caps spending growth by the Central Government debt ratio; debt rose back above 60 percent of GDP in 2025 (60.4 percent) and reached 61.2 percent in July 2026, so the 2027 budget falls under the strictest scenario with a 4.08 percent growth cap. The Contraloría estimates the 2027 bill at ₡12.4 trillion (22.3 percent of GDP), a 4.4 percent of GDP deficit and interest of 4.9 percent of GDP.

USD figures use the Banco Central de Costa Rica reference selling rate of ₡454.82 per US dollar (buying rate ₡449.44) published for 29 October 2026 (indicators 318 and 317 on bccr.fi.cr), rounded. Conversions are for orientation only.

Key facts

Deadline to submit the ordinary budget bill	1 September dateConstitución art. 178, as of 1949-11-07 · in force
Deadline for final approval of the budget law	before 30 November dateConstitución art. 178, as of 1949-11-07 · in force
Debt ratio that triggers the strictest fiscal rule scenario	60 % of GDPLey 9635 art. 11(d), as of 2018-12-03 · in force
Fiscal rule scenario applied to the 2027 budget	d scenarioLey 9635 art. 11; CGR DFOE-FIP-MTR-00004-2026, as of 2026-09-30 · in force
Maximum growth of current and total spending in 2027	4.08 %CGR DFOE-FIP-MTR-00004-2026, as of 2026-09-30 · in force
Central Government debt, end 2025	60.4 % of GDPCGR DFOE-FIP-MTR-00004-2026, as of 2026-09-30 · in force
Central Government debt, July 2026	61.2 % of GDPCGR DFOE-FIP-MTR-00004-2026, as of 2026-09-30 · in force
Hacienda projection of Government debt, December 2027 (budget bill)	65.5 % of GDPCGR DFOE-FIP-MTR-00004-2026, as of 2026-09-30 · pending
2027 budget bill spending	22.3 % of GDPBudget bill 2027, expediente 25.754, as of 2026-09-30 · pending
Financial deficit in the 2027 budget bill	4.4 % of GDPCGR DFOE-FIP-MTR-00004-2026, as of 2026-09-30 · pending
Primary surplus implied in the 2027 budget bill	0.5 % of GDPCGR DFOE-FIP-MTR-00004-2026, as of 2026-09-30 · pending
Interest in the 2027 budget bill	4.9 % of GDPCGR DFOE-FIP-MTR-00004-2026, as of 2026-09-30 · pending
Projected tax burden 2027	12.3 % of GDPCGR DFOE-FIP-MTR-00004-2026, as of 2026-09-30 · pending
Minimum budget allocation to the Judiciary	6 % of ordinary revenueConstitución art. 177, as of 1949-11-07 · in force

The rule

1. Public management must be sustainable, transparent and responsible and based on multiyear budgeting. The ordinary budget includes all probable revenue and all authorised spending of the Public Administration for the calendar year, and budgeted spending may never exceed probable revenue. The budget runs from 1 January to 31 December.Constitución Política, art. 176 as reformed by Ley 9696 of 11 June 2019, art. 176, 2019-06-11 official text · verified 2026-10-29 · changed: Ley 9696 of 11 June 2019 added the principles of fiscal sustainability and multiyear budgeting to art. 176.

2. The Executive prepares the bill through a specialised budget office and must allocate to the Judiciary at least 6 percent of estimated ordinary revenue. It submits the bill to the Asamblea Legislativa by 1 September, and the budget law must be finally approved before 30 November of the same year. The Assembly may not increase spending proposed by the Executive without identifying new revenue to cover it, after a Contraloría report on its fiscal effectiveness. Budgets may be amended only by laws initiated by the Executive, and the ordinary budget cannot be vetoed.Constitución Política, art. 125, 177, 178, 179 and 180, 1949-11-07 official text · verified 2026-10-29

3. The fiscal rule limits current spending growth of every budget in the non financial public sector to a share of average nominal GDP growth over the four years before the budget is drafted, according to Central Government debt at the close of the previous fiscal year: up to 100 percent of that average when debt does not exceed 30 percent of GDP; 85 percent from 30 to under 45 percent; 75 percent from 45 to under 60 percent; and, at 60 percent or more, 65 percent applied to total spending. The Ministerio de Hacienda publishes the resulting growth rate with the budget guidelines.Ley 9635, Title IV, art. 8(e) and art. 12 as reformed by Ley 10386 of 26 September 2023, art. 9, 10, 11 and 14, 2023-09-26 official text · verified 2026-10-29 · changed: Ley 10386 of 26 September 2023 redefined average GDP growth as nominal growth over the four years before the budget year and rewrote the extraordinary growth clause in art. 12.

4. When debt is at 60 percent of GDP or more (scenario d), extraordinary measures apply: pensions are adjusted only for cost of living; the Central Government may borrow only to relieve public debt or finance capital spending; no cost of living raises on the public salario base or other pay incentives, and no pay increase for deputies; and no bailouts, subsidies or other transfers to productive sectors unless a law authorises them. Above 50 percent of GDP, Hacienda may budget legally earmarked transfers according to revenue and the recipients' execution and surpluses.Ley 9635, as amended by Ley 9987 of 31 May 2021, art. 13 and art. 15, 2021-05-31 official text · verified 2026-10-29

5. The rule is suspended if a national emergency is declared whose response costs 0.3 percent of GDP or more (for at most two budget years), or if the economy is in recession, defined as two consecutive quarters of falling real GDP declared by the Banco Central, or growth is projected below 1 percent. Unjustified breach of the rule is a serious offence against the Public Treasury sanctioned under the Contraloría's organic law. Hacienda must publish a four year medium term fiscal framework each year.Ley 9635, art. 8(c), 16, 18 and 26, 2018-12-03 official text · verified 2026-10-29

6. For the 2027 budget the Contraloría reported that, because Central Government debt exceeded 60 percent of GDP in 2025, the rule returns to scenario d with a maximum growth of 4.08 percent for both current and total spending, and that the medium term fiscal framework keeps scenario d at least until 2033. Debt fell to 58.9 percent of GDP in 2024 from 60.4 percent in 2023 and rose again to 60.4 percent in 2025; the Contraloría attributes part of the rise to cash balances held above the 1 percent of GDP reserve target.Contraloría General de la República, Informe Técnico sobre el Proyecto de Ley de Presupuesto de la República 2027, DFOE-FIP-MTR-00004-2026 (expediente 25.754), Consideraciones finales and debt section, 2026-09-30 official text · verified 2026-10-29 · changed: Scenario d applies again for 2027 after debt crossed 60 percent of GDP at the end of 2025.

7. The 2027 budget bill proposes spending of ₡12.4 trillion, 22.3 percent of GDP and the lowest share since 2008, 37.7 percent financed with debt. The Contraloría estimates a financial deficit of ₡2.4 trillion (4.4 percent of GDP), a primary surplus of 0.5 percent of GDP, interest of ₡2.7 trillion (4.9 percent of GDP, 35.3 percent of current revenue), debt service of ₡5 trillion (40.3 percent of spending) and a tax burden falling from 13.7 percent of GDP in 2022 to 12.3 percent in 2027. Hacienda's own estimate in the bill takes Government debt to ₡37 trillion and 65.5 percent of GDP by December 2027, against 62.9 percent in the 2026 to 2031 medium term fiscal framework.
Example: Budget ₡12,400,000,000,000; interest ₡2,700,000,000,000; deficit ₡2,400,000,000,000; projected debt ₡37,000,000,000,000 at December 2027. / About US$27.26 billion of spending, US$5.94 billion of interest, a US$5.28 billion deficit and US$81.35 billion of debt.Contraloría General de la República, DFOE-FIP-MTR-00004-2026, Budget, deficit, interest and debt sections, 2026-09-30 official text · verified 2026-10-29

8. Loans contracted abroad, or financed with foreign capital even if agreed in Costa Rica, need approval by two thirds of all members of the Asamblea Legislativa; other public credit operations need ordinary approval. The Banco Central may lend to the Government only by buying its securities in the secondary market or limited Treasury bills.Constitución Política, art. 121(15) as reformed by Ley 4123 of 31 May 1968; Ley 7558, Constitución art. 121(15); Ley 7558 art. 52 and 59, 1968-05-31 official text · verified 2026-10-29

Central Government debt at prior year end	Spending growth cap	Spending covered
Up to 30% of GDP (or current spending at 17% of GDP)	100% of average nominal GDP growth	Current spending
30% to under 45%	85% of average nominal GDP growth	Current spending
45% to under 60%	75% of average nominal GDP growth	Current spending
60% or more	65% of average nominal GDP growth, plus art. 13 measures	Total spending

Fiscal rule scenarios (Ley 9635 art. 11)

Period	Debt to GDP	Note
2023	60.4	Observed
2024	58.9	Observed
2025	60.4	Observed
July 2026	61.2	Observed
2026	61.9	Medium term fiscal framework projection
2027	62.9	Medium term fiscal framework projection
December 2027	65.5	Hacienda estimate in the 2027 budget bill

Central Government debt, percent of GDP (Contraloría, DFOE-FIP-MTR-00004-2026)

Worked example

Reading the 2027 budget in dollars. Spending of ₡12.4 trillion is about US$27.26 billion; interest of ₡2.7 trillion is about US$5.94 billion; debt service of ₡5 trillion is about US$10.99 billion; projected Government debt of ₡37 trillion at December 2027 is about US$81.35 billion.
Applying the rule. The 4.08 percent cap equals 65 percent of average nominal GDP growth over the reference years, which implies an average of about 6.28 percent (4.08 divided by 0.65). A supplier to the State should expect public contract budgets to grow no faster than the cap and public sector salary scales to stay frozen while debt is at or above 60 percent.

Step by step

1. Read the budget bill's exposición de motivos (Ministerio de Hacienda) and the Contraloría's technical report each September for the official deficit, interest and debt path.
2. Check the fiscal rule growth rate Hacienda communicates with the budget guidelines (Ley 9635 art. 14) before bidding on multiyear public contracts.
3. Follow the Assembly's vote on the budget before 30 November and any two thirds votes on external loans (Constitución art. 121(15) and 178).
4. Track the medium term fiscal framework and the debt ratio; a fall below 60 percent at a year end would move the next budget out of scenario d.
5. See taxes/tax-system-overview for the tax side and start/reform-tracker for pending fiscal bills; use /dashboard/ for series.

Common traps

Assuming a budget surplus target. Costa Rica's rule caps spending growth; it does not target a balance, and the 2027 bill still shows a 4.4 percent of GDP financial deficit.
Expecting public pay or subsidies to rise with inflation. Under scenario d, cost of living raises on the public salario base and subsidies to productive sectors are frozen unless a specific law allows them (Ley 9635 art. 13).
Ignoring exemptions. The rule excludes competitive public enterprises (unless they request a bailout or their debt exceeds 50 percent of assets), RECOPE's oil bill, the CCSS pension funds and other listed items (Ley 9635 art. 6).
Mixing debt series. Central Government debt (used by the rule) differs from non financial public sector or total public debt; the Contraloría and Hacienda figures for 2027 differ (65.5 versus 62.9 percent) because of assumptions about cash balances.
Treating budget figures as final. The bill is amended in the Assembly and through extraordinary budgets during the year; use the published law in La Gaceta.

Sources

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