The World Bank In Costa Rica

Costa Rica has in many ways been a development success story. An OECD member country since 2021, it enjoys a long tradition of democratic stability and commitment to institutionality, while earning a reputation for being at the forefront of green development, being the first tropical country in the world to have reversed deforestation. The country has achieved all this while also moving to strengthen its macroeconomic fundamentals, with growth averaging 3.4 percent over the last decade, reaching 5.1 percent in 2023 and 4.3 percent in 2024, surpassing expectations. This growth is anchored by an outward-oriented model that has successfully targeted foreign investment and promoted trade liberalization. In the last three years, the domestic economy has also strengthened, supported by greater private consumption and investment, which helped mitigate the impacts of fluctuations in the global economy.

Despite these favorable economic conditions, the development model is facing significant challenges. Inequality is high. With a GINI coefficient of 49.2 in 2024, Costa Rica is among the most unequal OECD countries in terms of income distribution. Moreover, although the poverty reduction process was slow between 2010 and 2022, the pace picked up significantly between 2023 and 2024, and the rate fell by 4.1 percentage points. According to the National Institute of Statistics and Censuses (INEC), poverty levels declined to 20.3 percent of the population in 2024, following the COVID-19 pandemic.

The pandemic also highlighted the challenges in maintaining a robust and sustainable social compact, which threatened to undermine social mobility and citizens’ trust in institutions. Despite continued investments in education for instance, deficits in learning outcomes persist. According to Report No. 6 (2023) from the Education Observatory at Universidad Americana, in the 2022 OECD PISA test, Costa Rican students scored 415 points in reading, a decline of 11 percent from 2018 and below the OECD average of 476.

Fiscal difficulties also arose between 2008 and 2018, as a result of the increase in expenditure without corresponding revenues. A 2018 reform sought to stabilize the fiscal situation, but the pandemic and fluctuating commodity prices delayed adjustments. Public debt in Costa Rica increased from 56 percent of GDP in 2019 to 68 percent of GDP in 2021, while in 2024, the country closed the year with a public debt-to-GDP ratio below 60 percent, marking a historic milestone and surpassing the debt reduction target.

Rising revenues, expenditure control, and post-pandemic growth have enabled the country to post primary surpluses since 2022. In addition, fiscal consolidation has boosted confidence, leading to upgrades in sovereign credit ratings by major credit rating agencies.

Despite commendable efforts to combat deforestation, the country’s emissions have increased rapidly in the last two decades and could continue to grow in the absence of emission reduction reforms. Costa Rica also remains vulnerable to the effects of climate change, with 78 percent of the population considered at high risk.

These challenges are taking place in a context of broader global considerations, including a recent increase in migration levels and changes in the international trade context. The country is also facing perceptions of higher crime levels tied to drug trafficking. They nevertheless present an opportunity for Costa Rica to consolidate and preserve some exemplary gains, while addressing the underlying threats to its development model.

It will be crucial for Costa Rica to undertake measures to promote inclusive growth while continuing its efforts to consolidate an effective fiscal management strategy. The country needs to put in place the conditions for growth to be broad-based, and to fully reach its workforce and territory. Improving revenue mobilization and spending efficiency, especially in the infrastructure and social sectors, will be essential to tackling poverty and inequality, while strengthening climate resilience, reducing emissions, and consolidating the sustainability of its model.

Last Updated: Apr 17, 2025

The Country Partnership Framework (CPF), which was established by the World Bank and the Government of Costa Rica, has led to the solidification of a close partnership based on mutual learning and knowledge sharing in support of the country’s growth and development objectives.

The CPF for 2024–2028 was approved by the World Bank’s Board of Directors on April 30, 2024. This strategy, which reflects the analytical underpinnings of the Systematic Country Diagnostic Update (June 2023), focuses on promoting broad-based, inclusive economic growth; reinforcing and preserving human capital in key sectors such as education and social protection; and enhancing resilience to natural and social shocks and the effects of climate change.

These efforts are underpinned by two cross-cutting themes that guide the strategy’s implementation. They refer specifically to the aims of strengthening institutions, and to enhancing equity and inclusion across all the various World Bank interventions. This approach takes into consideration Costa Rica’s evolution as an upper-middle-income and OECD member country.

As of early April 2025, the World Bank’s active portfolio in Costa Rica includes seven projects totaling US$1626.6 million in net commitments: four investment projects (US$766.6 million); one development policy loan for budgetary support (US$500 million); and two development policy loans with deferred drawdown option (US$360 million).

The implementation of the Fiscal Management Improvement Project, known as "Hacienda Digital," aims to modernize and digitalize the Ministry of Finance to streamline tax and customs services and the payments system, reduce tax evasion, improve budget efficiency and debt management, and transform the institutional culture of this ministry to provide a quality citizen-centric service. The third loan in a series of Development Policy Operations, approved in June 2023, builds on efforts to support Costa Rica’s fiscal and decarbonization management.

The “Social Risk Management Development Policy Loan with Deferred Drawdown Option,” which was approved in November 2024, aims to improve the targeting of social programs by strengthening the National Information System and Single Registry of State Beneficiaries (SINIRUBE) to increase its coverage, robustness, and inclusiveness. It also aims to enhance the efficiency of social spending by reducing fragmentation and promoting better delivery systems for social transfers.  This operation functions as a contingent credit line, providing flexibility and liquidity to respond urgently to potential social or economic shocks.

The Costa Rica Results in Education project, approved in December 2024, is focused on improving foundational learning, digital competencies, and the employability skills of students in public primary and secondary schools administered by the Ministry of Public Education (MEP).  The project was prepared in close coordination with another loan from the Inter-American Development Bank (IDB), complementing efforts to achieve these objectives.

Two operations aim to strengthen fiscal, social, and physical resilience against disaster and climate risks in policymaking at the sectoral and territorial levels:

• A second Disaster Risk Management Development Policy Loan with a Catastrophe Deferred Drawdown Option (CAT-DDO), approved in March 2023, aiming to enhance the Government’s capacity to respond to disaster risks resulting from natural or health hazards.
• The Climate Resilient Recovery and Territorial Development Project, approved in March 2024, aiming to increase access to disaster and climate resilient infrastructure and services in vulnerable regions while working closely with communities to strengthen their engagement.

Costa Rica has also benefited since December 2020 from the Emission Reductions Payment Agreements with a commitment of up to US$60 million to purchase verified reductions of 12 million tons of CO2 emissions through its emission reductions program. The Forest Carbon Partnership Facility (FCPF) has already made two payments to Costa Rica: the first in August 2022 for US$16.4 million for reducing 3.28 million tons of carbon emissions and the second in September 2024 for US$17.6 million for 3.34 million tons of emissions reduced. The agreements cover payments for services associated with reducing emissions from deforestation and forest degradation and enhancing forest carbon stocks (REDD+) at the national level.

Last Updated: Apr 17, 2025

For the benefit of the Costa Rican population, through the Program for Results project "Strengthening Universal Health Insurance", the availability and quality of the universal health insurance system, as well as the institutional efficiency of the Costa Rican Social Security Fund (CCSS), were improved. Under the project, objectives such as the reduction of waiting lists and improvements in the treatment of chronic diseases were met. For example, the goal of 43 percent of patients with type II diabetes identified and with optimal clinical control was exceeded. Improvements in colorectal cancer screening also exceeded the goal of 40 percent of the target population. In addition, expectations were exceeded in the percentage of surgeries performed on an outpatient basis (46 %). One of the greatest achievements is in the expected percentage of the total number of primary health care units equipped with the Unique Digital Health Record (90.10 % achieved). The successful implementation of a pilot of integrated health care networks is another one of the attainments of the project.

A series of five informative notes, prepared in collaboration with the CCSS, analyses the factors that drove the success of the project "Strengthening Universal Health Insurance.” It describes how challenges were tackled and key lessons learned during the design and implementation, as well as their transformative actions. The series provides a practical guide to other countries interested in implementing similar programs and can be accessed here.

Disaster Risk Management (DRM) programs have further improved Costa Rica’s preparedness to respond to disasters through risk reduction and prevention programs. The regulatory and institutional DRM framework was strengthened with the introduction of a legal framework that requires all new public investments to follow DRM best practices and include a hazards assessment. This enhanced capacity of Costa Rica to implement its DRM program was supported by the WBG’s Catastrophe Deferred Drawdown Option (CAT DDO), which provides a source of immediate liquidity in case of disasters.

In December 2020, Emission Reductions Purchase Agreements for US$60 million were signed. In August 2022, Costa Rica became the first country in Latin America and the Caribbean to receive payments from the Forest Carbon Partnership Facility (FCPF), receiving $16.4 million for reducing 3.28 million tons of carbon emissions during 2018 and 2019; and a second payment of US$17.6 million in September 2024 for another 3.34 million tons of reduced carbon emissions.

Through the Higher Education Project, Costa Rica’s public higher education system has benefitted from an improvement in access and quality. Enrollment in undergraduate programs has reached the target of more than 102,000 students, and in graduate programs, more than 7,000. The total number of officially accredited programs in the four participating universities has also surpassed the target of 106. In the area of infrastructure, more than thirty construction projects have been completed, including new schools and university buildings, research laboratories and dormitories. The benefits for the indigenous population also stand out, with the number of indigenous students enrolled in the four universities doubling between 2014 and 2017.

The World Bank also conducts research and analysis in Costa Rica. In recent years, a Poverty and Inequality Assessment stands out, which contributed to understanding the factors that explain the stagnation of the poverty rate and the increase in inequality in a context of economic growth. The report provides high-level policy recommendations, which have made it possible to prioritize areas for dialogue with the government and other actors in the country.

Other analytical work has included a case study entitled “Primary Health Care Achievements and Challenges within the Framework of the Social Health Insurance,” research series on green and inclusive growth, the working paper “A Behavioral Approach to Water Conservation,” and a gender landscape paper showcasing key indicators helpful for monitoring gender equality and designing effective policy interventions.

Last Updated: Apr 17, 2025