Country Reports
2019
October 31, 2019
Republic of Madagascar: Technical Assistance Report—Government Finance Statistics Mission
Description: This Technical Assistance paper on the Republic of Madagascar explains the need for the Malagasy authorities to adopt the Government Finance Statistics Manual (GFSM) 2014 concepts, definitions, and methodology as part of the macroeconomic statistics improvement Project. The report recommends that it is important to improve macroeconomic analysis and monitoring of the overall impact of government finances on the country’s economy, something that other public finance ‘figures’ of a budgetary and accounting nature are not intended to do. The report shows that steady progress continues with the preparation of a bridge table between the chart of accounts and the GFSM 2014 classifications. Notable improvements have been made in the presentation of Other Net Treasury Operations, the detailed components of which were identified and can now be presented on a gross basis. Based on the progress made, the prospect of compiling consolidated GFS covering all subsectors of the Malagasy general government in a not-too-distant future is encouraging.
October 31, 2019
Togo: Fifth Review under the Extended Credit Facility Arrangement-Press Release; Staff Report and Statement by the Executive Director for Togo
Description: This paper discusses Togo’s Fifth Review Under the Extended Credit Facility (ECF) Arrangement. The report highlights that the economic recovery seems to be taking hold. Inflation stood at 0.6 percent at end-July 2019. Given high debt levels, revenue mobilization efforts and spending prioritization should continue, while addressing the persistent underperformance on social spending to enhance economic inclusiveness and to reduce poverty. It is important to address the weaknesses in the two public banks transparently. A successful privatization of these two banks would safeguard financial stability and minimize costs to the State budget. Broader financial sector developments should also be monitored, and corrective actions should be taken as needed, including in terms of the high nonperforming loans. Structural reforms are progressing on tax policy, revenue administration, and public expenditure management. Significant progress has also been made in the improvement of the business environment, which is expected to boost domestic and foreign private investment.
October 31, 2019
Slovak Republic: Technical Assistance Report-Public Investment Management Assessment
Description: This Technical Assistance paper assesses Slovak Republic’s public investment management framework using the IMF’s Public Investment Management Assessment (PIMA) methodology and advises the authorities on options to strengthen further the management of public investment. State-owned enterprises are major investors in infrastructure but are subject to little central oversight of their operational or financial performance. The report makes seven recommendations aimed at strengthening PIM institutions and reducing the identified efficiency gap. These recommendations focus on key bottlenecks and challenges in the investment process. Issues that warrant the authorities’ primary attention include introducing a strategic planning framework for public investment; developing a fully-operational pipeline of major projects, based on clear and robust selection criteria; and improving the credibility of the annual budget and medium-term budget ceilings. It also recommends establishing a national strategy and norms for routine and capital maintenance budgeting that will enhance the quality of strategic existing infrastructure.
October 30, 2019
Lao People’s Democratic Republic: Technical Assistance Report-Risk-Based Banking Supervision
Description: This Technical Assistance report on the Lao People’s Democratic Republic provides advice toward implementing risk-based supervision (RBS). Special attention needs to be given to expediting the formal approval of the RBS manual and fully implementing RBS methods in practice. Although this could be delayed due to other supervisory priorities, it is considered essential as the quality of supervision is improved by the practical application of RBS tools and learning-by-doing. The root causes of risks should be better identified, and greater attention should be paid to well-reasoned analysis of risks and the accompanied supervisory action. In addition, the mission advised additional modification of these documents to enhance its usefulness and quality. With respect to foreign-branch supervision, special consideration should be given to the extent of adequate oversight by the branch head office, supervision by the home supervisor, and overall financial condition of the foreign banking group. The mission provided examples of qualitative criteria for foreign-branch rating.
October 30, 2019
Russian Federation: Fiscal Transparency Evaluation Update
Description: This Technical Assistance paper on the Russian Federation provides a summary of the changes to Russia’s fiscal transparency practices since 2014 and makes recommendations for further improvements. Russia has made important progress in enhancing the coverage and detail of fiscal reporting since 2014, but assurances of the quality and integrity of fiscal reporting remain incomplete. Reforms to the statistical treatment of taxes and nonfinancial assets have improved the comparability of budgets, statistics, and accounts but transparent reconciliations between the three are still not provided. It is imperative to make Rosstat fully independent of government and produce and publish metadata explaining in an accessible way how the main fiscal indicators or datasets are compiled. The ministry of finance has initiated an annual assessment of the quality of loans and will begin writing-down the value of doubtful debts from 2020. Separate detailed reconciliations of changes to revenue and expenditure are included in the documentation accompanying the annual budget.
October 29, 2019
Democratic Republic of Sao Tome and Principe: Request for a 40-month Arrangement Under the Extended Credit Facility-Press Release; Staff Report; and Statement by the Executive Director for Democratic Republic of Sao Tome and Principe
Description: This paper discusses Democratic Republic of São Tomé and Príncipe’s Request for a 40-Month Arrangement Under the Extended Credit Facility (ECF). The ECF aims to support São Tomé and Príncipe’s economic and structural reforms. The program aims to reduce debt vulnerability, alleviate balance of payment pressures, restore fiscal and external sustainability over the medium term, promote sustainable and inclusive growth, and provide positive signals to stakeholders. Structural reforms should help mobilize revenue, enhance control over public spending, reduce contingent liabilities from state owned enterprises, improve financial stability, and promote sustainable and inclusive growth to reduce poverty, including through empowering women economically. The government plans to undertake sustained fiscal consolidation and reforms to reduce debt vulnerability. A floor on pro-poor spending, along with a World Bank social protection program, will protect the most vulnerable. The Fund-supported program will also play a catalytic role and provide positive signals to stakeholders.
October 29, 2019
France: Financial Sector Assessment Program-Technical Note-Balance Sheet Risks and Financial Stability
Description: This technical note on balance sheet risks and financial stability on France discusses that macroprudential policy setting faces the challenge of identifying growth of financial and macroeconomic variables above and below potential. A macro-financial structural model is presented that captures: sectoral dynamics of firms and banks and feedbacks between them; capital and default risk dynamics of each sector; capital and risk gaps i.e., deviations of capital and default risk from potential, and it provides; and a quantitative method for measurement. The report finds that default risk fluctuates during time between being too high and too low. Risk is too high during four episodes: prior to the Technology Crisis, prior to the Global Financial Crisis, prior to the Sovereign Debt Crisis, and now. The analysis implies that firms should be encouraged to strengthen their equity capital base by retaining earnings or issuing equity. This could be done also indirectly by publishing related research.
October 29, 2019
France: Financial Sector Assessment Program-Technical Note-Nonfinancial Corporations and Households Vulnerabilities
Description: This technical note on nonfinancial corporations and households vulnerabilities on France analyzes the structure of nonfinancial corporate financing in the French economy, potential vulnerabilities of the corporate sector, and their possible channels of transmission through interconnections with the financial system. The objective of this paper is to document the evolution of French corporate debt since the global financial crisis, analyze the riskiness of this debt, the quality of allocation of this debt, and uncover potential heterogeneity across sectors and firms which may have implications at the macroeconomic level. This paper also complements existing studies by the Institut National de la Statistique et des Études Économiques, the Haut Conseil de Stabilité Financière and the Banque de France by undertaking a cross-country comparative analysis. Empirical analysis suggests that corporate debt may be allocated efficiently across publicly listed companies, but the picture is less clear among nonpublicly listed firms.
October 29, 2019
France: Financial Sector Assessment Program-Technical Note-Risk Analysis of Banking and Insurance Sector
Description: This technical note presents risk analysis of banking and insurance sector in France. The assessment is based on stress tests, which simulate the health of banks, insurers under severe yet plausible (counterfactual) adverse scenarios. The stress tests reveal that banks and insurers would be resilient against simulated shocks, although some challenges remain. French banks have improved their capitalization and asset quality; however, profitability remains challenged. The report also highlights that profitability is pressured on both the income and expense sides. Banks’ ability to generate higher interest income is constrained by persistently low interest rates, and market businesses including trading activities have contracted in recent years. Growth-at-risk (GaR) analysis shows that the biggest contributing factors to the risk of growth are cost of funding and stock market prices. Financial conditions continue to tighten gradually since mid-2017; though the overall conditions remain accommodative. Risks stemming from loans to households seem to be contained over the short- to medium-term horizon, given relatively strong households’ balance sheets, no evidence of significant misalignment in house prices, social safety nets, and fixed interest rates.
October 29, 2019
France: Financial Sector Assessment Program-Technical Note-Issues in Insurance Supervision and Regulation
Description: This technical note focuses on issues in insurance supervision and regulation on France. France has a very high level of insurance penetration, particularly for life insurance. For each insurance company, a risk assessment is undertaken on at least an annual basis and is recorded in a supervisory review process tool. French insurance companies are significant users of the Volatility Adjustment (VA), with companies representing more than 90 percent of the technical provisions in the French insurance industry using the VA. The report discusses that French authorities should advocate to the relevant EU authorities to introduce a minimum number of independent members of the Administrative Management or Supervisory Boards, at least one-third. Autorité de Contrôle Prudentiel et de Résolution should review the intensity and frequency of on-site supervision and its relationship to off-site supervision. With several other meetings with insurance companies possible, some of these meetings may be close to be called as focused on-site inspections.