500 Colones (annexation of Partido de Nicoya to Costa Rica) – Costa Rica

Costa Rica's currency situation in 2024 is defined by a managed float of the colón (CRC) against the US dollar, within a band set by the Central Bank of Costa Rica (BCCR). The primary focus remains on controlling inflation, which saw significant global and domestic pressure in 2022-2023. While inflation has moderated, returning to the target range of 3% ± 1 percentage point, the BCCR maintains a cautious monetary policy. Its key interest rate has been held at 6.5% for an extended period to anchor expectations and ensure stability, contributing to a relatively stable exchange rate with moderate volatility throughout the year.

A persistent and structural feature is the high level of dollarization within the financial system. A significant portion of loans (over 40%) and deposits are denominated in US dollars, creating vulnerability for households and businesses to exchange rate fluctuations. This duality means that while the colón is the official currency, the US dollar operates as a parallel, de facto currency for many large transactions, real estate, and long-term savings. The BCCR continues to discourage further dollarization but recognizes it as an entrenched reality requiring careful management.

Looking forward, the key challenges and discussions for 2024 center on the sustainability of public debt and its impact on currency stability. While the fiscal deficit has been reduced following 2022's landmark agreement with the International Monetary Fund (IMF), the debt burden remains high. Market confidence, foreign direct investment, and the colón's stability are closely tied to the government's continued commitment to fiscal discipline. External factors, such as the monetary policy of the U.S. Federal Reserve and global commodity prices, also pose ongoing risks to the exchange rate and inflation outlook for the remainder of the year.