On Tuesday night, Rodrigo Cubero, President of the Central Bank of Costa Rica (BCCR), and Minister of Finance Rocío Aguilar announced they will issue Treasury Bills for ¢498 billion to bring resources to the government. This is a controversial measure that has a direct impact on inflation.
The Treasury Bills are a debt instrument consisting of bonds issued by the Treasury and purchased by the Central Bank. That is, the Central Bank will temporarily inject resources into the government.
The use of this instrument is limited to extraordinary cases, because the Bills cannot exceed one twelfth of the National Budget and must be paid in the same budgetary period in which they were requested.
This debt is valid for 90 days and the rate cannot be lower than the basic passive rate. Therefore, the expiration date was established on December 31st, 2018.
In Costa Rica, this measure has not been used since 1994. It is considered an inflationary measure because the Central Bank makes an extraordinary injection of resources to the economy, which has a direct impact on the prices of the economy. Nevertheless, Cubero believes it will barely have an impact, since it is reversed at the end of the year.
The repayment will be made with the resources that the Bank of Costa Rica will pay to the Treasury for the absorption of Banco Crédito Agrícola de Cartago (Bancrédito), among other resources.
The government resorts to this type of measure because Article 59 of the Organic Law of the Central Bank of Costa Rica expressly prohibits the Monetary Authority from granting any other type of financing to the government or public institutions.
The resources will be used for commitments that last until the end of the year, such as the payment of bonuses.