Country Reports
2020
January 13, 2020
Peru: 2019 Article IV Consultation-Press Release; Staff Report; Staff Statement and Statement by the Executive Director for Peru
Description: This 2019 Article IV Consultation discusses that Peru’s economic performance continues to be strong, however, external and domestic headwinds, including the fallout from Lava Jato corruption investigations, have reduced growth momentum and raised concerns about long-term growth prospects. Policy responses have been appropriate, but further reforms have been delayed by a political stalemate between the executive and legislative powers. After President Vizcarra dissolved Congress in September 2019, new parliamentary elections will be held in January 2020. The current slowdown in activity and heightened uncertainty justify policy stimulus. However, the fiscal stance is procyclical owing to higher-than-expected revenues and low execution of public investment. Against this background, monetary policy easing is particularly appropriate given the absence of inflationary pressures, while accelerated budget execution would mitigate the procyclical fiscal policy stance. In the medium term, additional fiscal space from tax revenues and effective expenditure control is needed to address priorities in infrastructure and social spending while a gradual transition to greater exchange rate flexibility would foster financial market development. In addition to infrastructure investment, key reforms are needed to improve governance and fight corruption, boost competitiveness, and reduce informality.
January 13, 2020
Peru: Selected Issues
Description: This Selected Issues paper evaluates features of the Peruvian tax system that may have contributed to weak revenue growth, as well as reforms to strengthen the tax system. Using data on domestic tax collection in conjunction with cross-country data on tax rates, collection and tax expenditures, we attempt to shed light on the factors that distinguish tax revenue mobilization in Peru from other countries in the region. The paper also discusses recent reforms in tax policy and tax administration, and present advice for continued progress in these areas. Elimination of multiple tax regimes for small businesses can provide a boost to revenues from corporate taxes. An IMF technical evaluation of the small business tax regimes finds that a rationalization of the two existing regimes into one with the same marginal rate as the general regime will result in revenue gains of around 0.14 percent of GDP. There is ample room to increase the contribution of excises and property taxes to overall tax revenues. Relative to the regional average, Peru will continue to lag peer economies even if the current reform performs at full potential. This suggests room for further policy reforms to bring excise taxes in line with the levels of comparable economies.
January 13, 2020
Central African Republic: Request for a Three-Year Arrangement under the Extended Credit Facility-Press Release; Staff Report; Staff Supplement; and Statement by the Executive Director for the Central African Republic
Description: This paper discusses Central African Republic’s (CAR) Request for a Three-Year Arrangement Under the Extended Credit Facility. Consistent with the IMF’s Country Engagement Strategy, the IMF-supported program is expected to support the implementation of the peace agreement and of CAR’s medium-term development strategy. Its main objectives are to maintain macroeconomic stability, strengthen administrative capacity, governance, and the business climate, and address CAR’s protracted balance of payments needs. Fiscal policy will focus on revenue mobilization, spending prioritization, and strengthening public financial management, with a view to allow, over the medium term, the durable financing of CAR’s considerable security, social, and infrastructure spending needs. Structural reforms will aim at improving the government’s capacity to design and implementing policies and reforms, at enhancing governance, including through strengthening anticorruption institutions, and at removing bottlenecks and regulatory impediments to private investment. The new arrangement will also help catalysing external concessional financing from other development partners, which is critical to support CAR’s path out of fragility. The IMF will also continue its extensive capacity development on priorities that are aligned with the program objectives.
2019
December 30, 2019
People's Republic of China-Hong Kong Special Administrative Region: 2019 Article IV Consultation Discussions-Press Release; Staff Report; Staff Statement and Statement by the Executive Director for the People's Republic of China-Hong Kong Special Administrative Region
Description: This 2019 Article IV Consultation with People’s Republic of China—Hong Kong Special Administrative Region (SAR) discusses that the economy is projected to start recovering next year, but the pace is expected to be gradual and both near- and medium-term risks have increased significantly, including from trade and technology tensions, ongoing social unrest, and structural challenges of insufficient housing supply and high income inequality. Hong Kong SAR is well placed to address both cyclical and structural challenges with its significant buffers thanks to its long history of prudent macroeconomic policies. Given that the fiscal framework permits deficits during economic downturns, government spending should be increased significantly in the areas of social safety nets, education/retraining, and infrastructure to cope with the cyclical downturn and address structural challenges of insufficient housing and high-income inequality. This should be complemented with measures to ensure fiscal sustainability and greater equity.
December 30, 2019
Armenia: First Review under the Stand-By Arrangement-Press Release; Staff Report; and Statement by the Executive Director for the Republic of Armenia
Description: This paper highlights Republic of Armenia’s First Review Under the Stand-By-Arrangement. Armenia’s economic performance is strong with healthy growth, low inflation, a stable financial system, with increasing foreign reserves and higher revenues. Despite fiscal overperformance, it is key to maintain the reform momentum to strengthen revenue mobilization, including by completing reforms to property taxation. Implementation of the authorities’ reform agenda including efforts to improve governance by establishing a holistic anti-corruption framework, will bolster sustainable and inclusive growth. The monetary policy framework’s focus on price stability has served Armenia well. The authorities’ implementation of Basel III measures will raise the resilience of the financial system, while their plans to develop the capital market and improve access to finance are also welcome.
December 30, 2019
Burkina Faso: Third Review under the Extended Credit Facility Arrangement-Press Release; and Staff Report
Description: This paper discusses Burkina Faso’s Third Review Under the Extended Credit Facility (ECF) Arrangement. Policies and reform implementation under the ECF-supported program have been satisfactory. All end-June 2019 quantitative performance criteria and indicative targets were met as well as all, but one, structural benchmarks throughout end-November 2019. Notwithstanding security challenges, economic growth remains resilient and is expected to stabilize at 6 percent in 2019 and over the medium term. Inflation is expected to be negative in 2019, owing to food price deflation following recent good harvests, and to rebound in 2020. However, the security crisis poses risks to the growth outlook and to the authorities’ reform agenda. Reforms to curb wage bill growth are advancing in some areas, including the implementation of transitional measures to help bring down the wage bill relative to tax revenues. However, progress toward the adoption of the overall reform package is limited. Pending approval of this overall reform package, the authorities are committed to refrain from any new agreements on wages or allowances outside of the security sector.
December 30, 2019
Philippines: Technical Assistance Report-Monetary and Financial Statistics Mission
Description: This Technical Assistance report focuses on Philippines’s monetary and financial statistics (MFS). In order to align the coverage of the other depository corporations survey to statistical standards, the mission recommended the inclusion of the money market unit investment trust funds in the survey. With the compilation of other financial corporation’s data, the Philippines is now able to produce intersectoral balance sheet approach (BSA). MFS with full coverage, together with quarterly international investment position and public debt statistics, are the building blocks for the BSA. The mission recommended a detailed action plan with the following priority recommendations carrying weight to make headway in improving MFS quality and completeness. The experience by BSP compilers on data reporting by Securities and Exchange Commission supervised corporations pointed to a need to enhance the Bangko Sentral ng Pilipinas’s (BSP) authority to collect data for statistical purposes, which has been addressed by BSP management. Details on the priority recommendations and the related actions/milestones can be found in the action plan under Detailed Technical Assessment and Recommendations.
December 27, 2019
Chad: Fifth Review under the Extended Credit Facility Arrangement and Financing Assurances Review-Press Release; Staff Report; Staff Supplement; and Statement by the Executive Director for Chad
Description: This paper highlights Chad’s Fifth Review Under the Extended Credit Facility (ECF) Arrangement and Financing Assurances Review. Chad’s performance under the Fund’s ECF-supported program has been broadly satisfactory, reflecting strong commitment by the authorities despite a challenging environment, including security concerns and a tense social situation. Good progress on the structural reform agenda has been made, despite some delays. Looking ahead, it is essential that the authorities continue to pursue prudent fiscal policy, particularly in the run up to the upcoming elections, create enough fiscal space for increased social and development spending, and pay down domestic debt and arrears. Chad’s program is supported by the implementation of supportive policies and reforms by the regional institutions in the areas of foreign exchange regulations and monetary policy framework and to support an increase in regional net foreign assets, which are critical to the program’s success.
December 26, 2019
Turkey: Selected Issues
Description: This Selected Issues paper on Turkey assesses the role of structural reforms in enhancing productivity growth in advanced and emerging economies and discusses results that are relevant for Turkey. The paper investigates the role of structural reforms in boosting productivity growth and describes the stochastic frontier set-up for analyzing factors that affect output through technical efficiency; and subsequently presents empirical results. It also simulates productivity gains from closing the structural reform gaps between Turkey and its benchmark. Structural reforms to improve hiring and firing regulations, the business and regulatory environment, and skills are found to have the largest estimated long-term productivity gains for Turkey. In order to bolster Turkey’s sustainable medium-term growth prospects, structural reforms should be implemented sooner rather than later, and any possible negative reform impacts in the short run could be limited by a reform sequencing and reform complementarities.
December 26, 2019
Turkey: 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Turkey
Description: This 2019 Article IV Consultation with Turkey discusses that economic growth has since resumed, buoyed by expansionary fiscal policy, rapid credit provision by state-owned banks, and more favorable external financing conditions. The lira also recovered as market pressures abated. Import compression and a strong tourism season have contributed to a remarkable current account adjustment. Inflation has fallen sharply, and the central bank cut policy rates by 1000 basis points since July 2019. Inflation peaked at around 25 percent—five times the target—in October 2018 due, in large part, to high exchange rate passthrough and rising inflation expectations. However, strong base effects, relative lira stability, and a negative output gap have since contributed to a steep inflation decline, although inflation expectations remain well above target. State-owned banks are supporting rapid credit growth. While private banks have cut back on their lending, state-owned banks have engaged in a major credit expansion which picked up pace in early-2019.