Country Reports
2020
March 25, 2020
Republic of Fiji: 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Republic of Fiji
Description: This 2019 Article IV Consultation with the Republic of Fiji highlights that economic activity slowed sharply in 2019 due to lower government spending, tighter domestic financial conditions, weak sentiment, and the global deceleration. The slowdown followed several years of relatively strong growth, boosted by reconstruction spending after a major cyclone in 2016, which resulted in rising external and fiscal imbalances. Fiscal space is now at risk and external vulnerabilities remain significant. Fiji has large investment needs to strengthen resilience to natural disasters and climate change. A key priority should be to rebuild fiscal buffers in a growth-friendly way to create space to respond to future natural disasters and to ensure public debt sustainability. Fiscal consolidation should focus on reining in current spending given limited scope for further revenue mobilization and the need for capital spending to improve resilience to climate change. Improvements in the business environment and in governance are essential to raise potential growth and boost private investment, and to enhance productivity and competitiveness.
March 24, 2020
El Salvador: Technical Assistance Report-Capacity Development on National Accounts Statistics Mission
Description: A Technical Assistance (TA) Mission from the Regional Technical Assistance Center for Central America, Panama, and the Dominican Republic, visited the city of San Salvador, El Salvador, on August 13–24, 2018, to provide TA to the Central Reserve Bank of El Salvador (BCRES) on compiling annual accounts by institutional sectors (AAIS) from 2014 onwards, as part of the data series from the base year of 2005. In March 2018, the BCRES published a dataset of quarterly and annual national accounts series by economic activity; a monthly volume indicator; backcasted series from 1990–2014; and Supply and Use Tables (SUT) from 2005 and 2014, with a base year of 2005. As part of the dataset to be prepared and disseminated in the new 2005 base year, the authorities requested TA to compile annual accounts focusing on institutional sectors starting in 2014.
March 20, 2020
Italy: 2020 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Italy
Description: This 2020 Article IV Consultation with Italy reflects discussions with the Italian authorities in January 2020 and is based on the information available as of January 28, 2020. It focuses on Italy’s medium-term challenges and policy priorities and was prepared prior to the outbreak of COVID-19 in Italy. It, therefore, does not cover the outbreak or the related policy response, which has since become the overarching near-term priority. The outbreak has greatly amplified uncertainty and downside risks around the outlook. Staff is closely monitoring this health crisis and will continue to work on assessing its impact and the related policy response in Italy and globally. The overarching challenges are to raise growth and enhance resilience. The IMF staff projects growth in Italy to be the lowest in the European Union over the next five years. High public debt remains a key source of vulnerability. Substantial progress has been made in strengthening bank balance sheets, but important weaknesses remain. In order to durably raise growth and reduce vulnerabilities, Italy needs faster potential growth and medium-term fiscal consolidation.
March 20, 2020
Italy: Financial System Stability Assessment
Description: This Financial System Stability Assessment paper on Italy highlights that substantial progress has been made in recent years in strengthening the financial sector, however, important weaknesses remain. Bank capitalization and asset quality have improved considerably but are still below the European Union average and the financial sector has large exposures to the Italian sovereign. The financial sector faces important vulnerabilities and a challenging baseline outlook. The sector is highly dependent on the European Central Bank’s Targeted Longer-Term Refinancing Operations. Profitability is also still low, particularly in segments of small and mid-sized banks. This reflects in part weak economic growth in Italy over the past decade, as well as high structural operating costs, unsustainable business models and corporate governance weaknesses. Solvency stress tests indicate that many banks with material aggregate total asset share continue to be vulnerable to an adverse scenario. Efforts should focus on further enhancing banks’ capitalization, operational efficiency, governance, and business models. Specifically, the authorities should consider more escalated corrective measures for weak banks, utilizing the full gamut of their toolkit, to ensure that banking sector weaknesses do not linger, and costs are contained.
March 20, 2020
Argentina: Technical Assistance Report-Staff Technical Note on Public Debt Sustainability
Description: This Technical Assistance report on Argentina sets out IMF staff’s views on a feasible macroeconomic framework that could underpin a debt restructuring operation that would restore debt sustainability with high probability. Given that the authorities are in the process of elaborating the precise content of their policy agenda, the feasible macroeconomic framework is anchored around the authorities’ broad policy announcements and predicated on the IMF staff’s view that a set of policies could be fully developed and implemented to render the macroeconomic framework achievable. However, there are important downside risks to the feasible macroeconomic framework, especially if the adverse global and domestic economic effects of the fast-moving COVID-19 pandemic are larger and more prolonged than assumed in this note. Economic conditions are rapidly worsening, and financial conditions are characterized by very high volatility. This greatly increases the uncertainty about the macroeconomic framework, with potential implications for the IMF staff’s assessment of debt sustainability.
March 18, 2020
Republic of Moldova: Staff Report for the 2020 Article IV Consultation and Sixth Reviews Under the Extended Credit Facility and Extended Fund Facility Arrangements-Press Release; Staff Report; and Statement by the Executive Director for the Republic of Moldova
Description: This paper presents 2019 Article IV Consultation with the Republic of Moldova and its Sixth Reviews Under the Extended Credit Facility and Extended Fund Facility Arrangements. Moldova’s economic growth remained solid in the first three quarters of 2019, with output expanding nearly 5 percent, supported by strong domestic demand. The three-year program has been broadly successful in achieving its objectives. Comprehensive reforms have rehabilitated the banking system and strengthened financial sector governance, entrenching macrofinancial stability. Prudent and well-coordinated policies are needed to safeguard the progress achieved. Decisive governance and institutional reforms are necessary for faster, sustainable, and inclusive growth. Safeguarding central bank independence is a priority. The inflation-targeting (IT) regime remains appropriate, but additional efforts are needed to improve policy credibility, promote exchange rate flexibility, and disincentivize foreign currency intermediation. Widespread governance and institutional vulnerabilities are major impediments to accelerating income convergence. Addressing these could have significant growth dividends through faster capital accumulation, reduced labor and human capital headwinds from emigration, and higher productivity.
March 18, 2020
Republic of Moldova: Selected Issues
Description: This Selected Issues paper provides a systematic assessment of Moldova’s governance and institutional frameworks. It follows guidelines approved by the IMF executive board, which were developed to deliver systematic and even-handed analysis on macroeconomically critical governance and institutional vulnerabilities. This paper also focuses on seven key areas for IMF engagement: corruption, rule of law, regulatory framework, fiscal governance, financial sector oversight, anti-money laundering/combating the financing of terrorism, and central bank governance. The analysis is based on internationally comparable data, diagnosis from IMF technical assistance reports, as well as other expert assessments. Strengthening the judiciary and rule of law and accelerating state-owned enterprises (SOE) reform are clear priorities. The widespread nature of governance vulnerabilities and institutional weaknesses in Moldova, combined with capacity constraints, creates challenges for policy formulation and prioritization. Policy efforts should therefore focus on strengthening rule of law and reforming Moldova’s judiciary system, as well as building capacity and increasing the autonomy of key institutions. Steadfast SOE reform would foster competition, investment, and productivity, while reducing fiscal risks.
March 17, 2020
Bosnia and Herzegovina: Technical Assistance Report-Government Finance Statistics Mission
Description: This paper on Bosnia and Herzegovina presents the report on the government finance statistics technical assistance mission in Bosnia and Herzegovina. Further on developing reconciliation processes, the mission provisionally finalized research to establish reconciliation procedures, without fully eliminating statistical discrepancies. On the compiling of nonbudgetary public sector units, the mission continued the development of compilation processes as started during the May 2018 mission. Considering the differences in outcomes on balance sheet transactions between the ‘old’ and the ‘new’ compilation process, further research is required to test the plausibility of these compilation processes and outcomes. The mission will liaise with IMF’s European Department on an appropriate implementation procedure in coordination with other reporting units in Bosnia and Herzegovina that are also revising fiscal surveillance to the Government Finance Statistics Manual 2014 framework. The mission succeeded in resolving statistical discrepancies—at least from accounting technical point of view.
March 10, 2020
Sudan: Selected Issues
Description: This Selected Issues paper on Sudan provides a first stock-taking of the scale, main transmission channels and potential costs of poor governance and corruption in Sudan and offers preliminary recommendations. A large body of literature and country analyses confirm that weak governance and corruption undermine economic growth, amplify income inequality and erode public trust in the institutions. According to international agencies and existing literature, Sudan has scored very poorly on compliance with rule of law best practices in the past. Effective implementation of preventive measures is important; particularly in relation to politically exposed persons. Transparency on beneficial ownership of legal persons and arrangements to prevent their misuse for laundering the proceeds of corruption are necessary. Transparency, accountability, and comprehensive communication should be the backbone of governance and anti-corruption reforms in each sector. Rationalizing tax exemptions and phasing out tax holidays would strengthen governance while boosting fiscal revenues.
March 10, 2020
Sudan: 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Sudan
Description: This 2019 Article IV Consultation with Sudan discusses that regime change has created a window of opportunity for fundamental reforms to address major macro imbalances and lay the groundwork for inclusive growth. The economy is shrinking, fiscal and external imbalances are large, inflation is high, the currency is overvalued, and competitiveness is weak. The humanitarian situation is dire with large numbers of internally displaced people and refugees. US sanctions on trade and financial flows were revoked in October 2017, but Sudan remains on the state sponsors of terrorism list, which effectively discourages external investment and blocks progress toward both heavily indebted poor countries debt relief and the clearance of large arrears to the IMF. In this context, staff engagement has intensified to render the necessary policy and technical assistance to help the authorities seize this once-in-a-generation opportunity for reforms. There is broad agreement between the authorities and the IMF staff about the key reform priorities, however, the authorities have yet to put together a fully coherent and viable plan that enjoys broad public support and can plausibly attract adequate donor financing.