| Summary: | This technical assistance report on Costa Rica discusses upgrading the rule-based fiscal framework. A principles-based classification would allay political pressure for ad-hoc exclusions. The criteria should follow the statistical principles of the Government Finance Statistics Manual: entities under government control and classified as a non-market producer should be included in the fiscal rule. The compliance with the fiscal rule should be assessed at the aggregate level, at least for the central government statistical concept. Ex-post compliance of the expenditure rule could be verified based on the fiscal outturn relative to the initial budget of the previous year. This would avoid the unintended effects from an underexecuted budget. A risk-based approach in determining the debt anchor would consider the macroeconomic shocks and debt composition in Costa Rica, alongside with the sizable development needs. Integrating the debt anchor in the medium-term fiscal framework would reinforce consistency. The fiscal council can strengthen oversight
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