The ratings on Costa Rica balance the country's limited monetary flexibility and rising fiscal pressures with good economic prospects, stable political system, and relatively high level of social development. Costa Rica's monetary rigidities reflect ongoing losses at the central bank, about 0.6% of GDP in 2011, and a high, albeit declining, level of dollarization, standing at roughly one-third of the financial sector's claims and deposits. Inflation targeting is complicated because of the managed exchange rate regime. Costa Rica has had a hard time containing fiscal spending, which rose substantially during the past three years. Yet, the tax reform, which the government proposed in early 2011 to stabilize the fiscal accounts and afford much-needed infrastructure and security spending, faces opposition and
