Funds from liquidity program for growth sustainability are part of the government’s efforts to tackle the global crisis
Costa Rica will use a $500 million Inter-American Development Bank loan to boost credit to the manufacturing and exporting sectors in order to bolster economic momentum and mitigate the consequences of the global financial emergency.
The loan is part of the IDB's Liquidity Program for Growth Sustainability (LPGS) set up to help Latin American and Caribbean governments alleviate the effects of the international turmoil on their countries' macroeconomic stability, growth, and employment.
The funds approved Dec. 17 by the Bank's Board of Directors will help the Central Bank of Costa Rica extend lending in dollars to local financial institutions so that they can channel additional credit for working capital and trade financing to exporters and other enterprises within the export chain.
The funds will also support the Central Bank's efforts to assist domestic companies whose traditional access to direct financing from foreign suppliers has been cut off due to the current global difficulties and are now being forced to tap the local market for credit.
The program is consistent with the goal of supplying crisis lending to help nations to weather the financial storm.
Costa Rica has experienced solid expansion in recent years but is expected to grow only 3.6% in 2008--well below gains posted in 2006 and 2007--, while exports and capital inflows will probably decline further in 2009 as a result of the U.S. economic slowdown and its adverse impact on the world economy.
The loan if for a five-year term, with a three year grace period, at an interest rate based on six-month LIBOR plus 400 basis points annualized.