Storm-shaken Costa Rica urged to shore up budget against climate shocks

by Sebastian Rodriguez | @sebas211297 | Thomson Reuters Foundation
Wednesday, 28 November 2018 14:00 GMT

A man cleans a street flooded by Tiribi river during heavy rains brought by Tropical Storm Nate in San Jose, Costa Rica, October 5, 2017. REUTERS/Juan Carlos Ulate

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Top officials warn extreme weather could put growing pressure on shaky public finances, and more efficient spending is needed

By Sebastian Rodriguez

SAN JOSE, Nov 28 (Thomson Reuters Foundation) - When Hurricane Otto hit Costa Rica in 2016, it was one of the most expensive disasters in the country's history, causing losses of more than $200 million, according to the government.

Reconstruction costs ballooned further when Tropical Storm Nate battered the Central American nation just a year later.

Top officials are now warning that climate change could intensify pressure on the state's deteriorating finances.

Costa Rica still has about $300 million in debts incurred from the two disasters, which it has struggled to pay back as its budget deficit worsens.

And as extreme weather becomes more frequent, it is likely to have to spend more repairing the damage.

Public finances need to adapt to the effects of climate change, including more ferocious storms, just as farmers or tourism operators must, experts say.

Costa Rica's Comptroller General Marta Acosta has urged all government agencies to consider climate risks when preparing their budgets.

She told the Thomson Reuters Foundation she was "worried" about the situation, and did not detect a sense of urgency among legislators to prepare for climate change.

"We know that, in case of not taking action, the gradual impact will be increasing," she said.

A report issued in January by the General Comptroller's Office, which Acosta leads, showed the country may have to spend up to 2.5 percent of its gross domestic product (GDP) by 2025 on rebuilding after disasters.

Carolina Retana, one of the report's authors, noted the difficulty of collating data on state spending to address climate change as it is spread out across different departments.

The researchers proposed creating a "climate fiscal framework" - a fiscal registry that would track every penny committed to curbing climate change and addressing its impacts.

That would allow the country to quantify its resources and allocate them where needs are highest, they said.

At an October congressional hearing, Acosta urged lawmakers to create such a framework to identify and monitor all public funds allocated to tackling climate change.

Right now, the government does not know exactly how much money it is spending to that end, since the cash is divided between institutions, with much going unnoticed, she explained.

Tracking climate spending would enable the funds to be used more wisely and efficiently in line with priorities, she added. "This... is fundamental given their scarcity," she said.

A woman walks in front of houses destroyed by a landside after Hurricane Otto hit, in Guayabo de Bagaces, Costa Rica, November 25, 2016. REUTERS/ Juan Carlos Ulate

'CRITICAL SITUATION'

Costa Rica would not be the first country to try to get a better grip on domestic climate funding. Bangladesh was one of the earliest to do so in 2014.

According to a government report, the South Asian state learned it was spending about 1 percent of GDP on measures to tackle climate change, while some ministries did not acknowledge part of their budget was being used for that purpose.

Acosta said Costa Rica could better protect its people and assets - both public and private - by boosting the efficiency of efforts to cut carbon emissions and adjust to climate shifts.

Costa Rica is currently facing the highest fiscal deficit in its history, at about 7 percent of GDP, due to increased government spending and falling tax revenues.

By June this year, the government's expenses were five times higher than its income.

"We know that we are in a critical situation. Therefore, the scarcer the resources, the more we have to plan," Acosta told the hearing in the Legislative Assembly. "Climate events are going to continue and they will be more and more intense."

Costa Rica's vice finance minister, Rodolfo Cordero, said he was concerned the country's indebtedness would rise even further as extreme weather becomes more frequent.

"For this type of climatic phenomena, the expenses are very large. To the extent that there are fewer resources available, it is more difficult to deal with that situation," he told the Thomson Reuters Foundation.

Putting in place a "climate fiscal framework" would require political support and approval by the Legislative Assembly, according to researchers at the General Comptroller's Office.

Paola Vega, congresswoman for the ruling Citizens' Action Party, said legislators may not necessarily oppose such a measure, but were unaware of the urgency.

"It will be useless to recover from the fiscal crisis if we know that every year we will have extreme weather conditions that will leave important losses in infrastructure and development that must be addressed," she said.

(Reporting by Sebastian Rodriguez; editing by Megan Rowling. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, climate change, resilience, women's rights, trafficking and property rights. Visit http://news.trust.org/climate)

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