The ratings on Costa Rica reflect its good economic growth, rising tax revenues, and modestly declining government debt burden. They also reflect Costa Rica's strong public institutions and comparatively high level of human development, both of which contribute to social stability and predictability in economic policies. The country's political consensus on macroeconomic policies and its social cohesion facilitate investment and growth, balancing the potential risk that arises from an inflexible exchange rate arrangement, monetary inflexibility, and a narrow tax base. The stable outlook incorporates the expectation of good economic growth and rising tax revenues in 2007, modestly reducing the government's debt burden. Growing international reserves, plus gradual steps to boost exchange rate flexibility and the effectiveness of monetary policy, should
