Country Reports
2018
December 11, 2018
Brazil: Financial Sector Assessment Program-Technical Note on Fund Management: Regulation, Supervision and Systemic Risk Monitoring
Description: Brazil has a large and diverse investments funds sector which is subject to a robust regulatory framework. The competent authority, the Comissão de Valores Mobiliários (CVM), requires high standards of the entities it oversees and makes good use of the extensive data it receives from market participants on an ongoing basis. Fiduciary administrators play an important role as the main gatekeeper for investment funds and, despite the highly concentrated nature of the industry, there is evidence that they make a significant contribution to the safety and soundness of the sector as a whole.
December 7, 2018
Republic of Poland: Technical Assistance Report-Revenue Administration Gap Analysis Program—The Value-Added Tax Gap
Description: This report presents the results of applying the Revenue Administration Gap Analysis Program (RA-GAP) value-added tax (VAT) gap estimation methodology1 to Poland for the period 2010–16. The RA-GAP methodology employs a top-down approach for estimating the potential VAT base, using statistical data from national accounts on value-added generated in each sector. There are two main components to this methodology for estimating the VAT gap: 1) estimate the potential VAT collections for a given period; and 2) determine the accrued VAT collections for that period. The difference between the two values is the VAT gap. RA-GAP provides estimates of the two components of the tax gap: the compliance gap and the policy gap. The compliance gap is the difference between the potential VAT that could have been collected given the current policy framework and actual accrued VAT collections. The policy gap is the difference between the overall tax gap and the compliance gap. To put the level and trends of the compliance gap into context it is also necessary to analyze the level and trends of the overall tax gap and the policy gap.
December 6, 2018
Botswana: Technical Assistance Report-Government Finance Statistics
Description: In response to a request for IMF technical assistance (TA) made by the Botswana authorities and in consultation with the IMF’s African Department, a government finance statistics (GFS) TA mission from the IMF’s Statistics Department (STA) visited Gaborone during April 13–26, 2016. The mission is part of the GFS Module of the United Kingdom’s Department for International Development-funded Enhanced Data Dissemination Initiative 2. The main objective of the mission was to continue to assist the Ministry of Finance and Development Planning (MFDP) in the compilation and dissemination of fiscal statistics in accordance with the guidelines of the Government Finance Statistics Manual 2014 and Public Sector Debt Statistics: Guide for Compilers and Users.
December 6, 2018
Botswana: Technical Assistance Report-Government Finance Statistics
Description: In response to a request for IMF technical assistance (TA) made by the Botswana authorities and in consultation with the IMF’s African Department, a government finance statistics (GFS) TA mission from the IMF’s Statistics Department visited Gaborone during the period March 13–24, 2017. The mission is part of the GFS Module of the United Kingdom’s Department for International Development-funded Enhanced Data Dissemination Initiative 2. The main objective of the mission was to continue to assist the Ministry of Finance and Economic Development (MFED) in the compilation and dissemination of fiscal statistics in accordance with the guidelines of the Government Finance Statistics Manual 2014 (GFSM 2014) and Public Sector Debt Statistics: Guide for Compilers and Users.
December 6, 2018
Botswana: Technical Assistance Report-Government Finance Statistics
Description: A Government Finance Statistics (GFS) technical assistance (TA) mission visited Gaborone, Botswana, during October 9–20, 2017 to support the Botswana Ministry of Finance and Economic Development (MFED) in improving compilation and dissemination of fiscal statistics. The mission provided assistance with: (i) disaggregation of expense transactions in the statement of operation in accordance with the Government Finance Statistics Manual (GFSM) 2014 to distinguish grants, subsidies, and other expenses; (ii) review of the new chart of accounts (CoA) and mapping from the old chart to the new one; (iii) compilation of government expenditure using the classification of functions of government (COFOG); and reviewed progress on the migration plan to GFSM 2014 compliant compilation and reporting of fiscal and debt statistics. The mission was undertaken jointly with the IMF’s Regional Technical Assistance Center in Southern Africa (AFRITAC South/AFS) Public Finance Management (PFM) TA mission.
December 4, 2018
The Federal Democratic Republic of Ethiopia: 2018 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for The Federal Democratic Republic of Ethiopia
Description: Context: In 2017/18 growth slowed due to political uncertainty and appropriately restrictive macroeconomic policies. The external current account deficit narrowed to 6.4 percent of GDP reflecting public-sector fiscal consolidation and a tight monetary policy stance. Reserves were thin and foreign exchange shortages persisted. Prime Minister (PM) Abiy Ahmed took office in April 2018, catalyzing a drive for reforms, including towards economic opening. Outlook: Output growth is expected to accelerate to 8.5 percent in 2018/19 as political uncertainty abates and financial inflows temporarily ease external constraints. The Debt Sustainability Analysis (DSA) continues to assess Ethiopia at high risk of debt distress. Reforms announced by the authorities—including privatizations and opening key sectors to competition and private investment—pose a substantial upside growth potential.
December 4, 2018
The Federal Democratic Republic of Ethiopia: Selected Issues
Description: This Selected Issues paper investigates the macroeconomic impact of existing gender gaps in Ethiopia and discusses the authorities’ policies in the areas of gender equality and women’s rights, with a focus on women’s economic engagement. Ethiopia has shown a firm political commitment to the advancement of gender equality and women’s rights; however significant challenges around women’s economic participation remain. Whilst most people work in Ethiopia, women face many barriers to formal labor force participation, have lower levels of education than men—particularly at secondary and tertiary levels—and have significant wage gaps compared to men. The findings suggest that, eliminating gender gaps in both educational attainment and the rate of formal employment could increase output in Ethiopia over time by over 24 percent. Improved institutional capacity would lead to better integration of gender issues into the planning and implementation of government policies. Ethiopia has already embedded gender units within the structure of many of its ministries.
December 4, 2018
United Republic of Tanzania: Financial System Stability Assessment-Press Release; Staff Report; and Statement by the Executive Director for the United Republic of Tanzania
Description: Tanzania’s bank-dominated financial sector is small, concentrated, and at a relatively nascent stage of development. Financial services provision is dominated by commercial banks, with the ten largest institutions being preeminent in terms of mobilizing savings and intermediating credit. Medium-to-small banks rely systematically more on costlier, short-term, interbank financing and institutional deposits and have markedly higher operating costs. These structural features underpin financial stability challenges which are significant. Bank asset quality has deteriorated sharply in recent years, and under-provisioning is significant, belying the apparently comfortable capital cushions. Credit growth has fallen precipitously, corporate debt loads have risen, and their cash flows are weak. Dollarization of bank balance-sheets raises the possibility of solvency stress under shocks being exacerbated by funding liquidity pressures, especially at smaller banks.
December 3, 2018
Cyprus: Selected Issues
Description: This Selected Issues paper identifies key challenges among households in reducing nonperforming loans (NPL) further in Cyprus, namely, low repayment capacity, particularly among a certain group of debtors; and weak repayment discipline owing to strategic behavior. Despite some revival of lending activity, the role of bank credit as a funding source remains limited. External inflows, drawdown of savings, use of own funds, and unpaid debt service obligations are contributing to financing economic activities, but these sources may not be sustainable over the medium term. Addressing NPLs to lower borrowing costs and reviving credit supply will be important for supporting longer-term growth. Since 2017, bank credit has provided only a moderate amount of new financing. The reduction in credit-to-GDP ratio has been almost entirely achieved by NPL write-offs and sale or transfer of loans out of the banking system, and through denominator effect. As of 2017, credit demand appears moderately strong, in line with robust economic growth, while credit supply remains broadly unchanged, reflecting continued risk averseness by banks. These trends suggest that while deleveraging is expected to continue through clean-up of bank balance sheets, growth in credit flows (pure new loans) are likely to remain at a moderate level until NPL recovery and repayment discipline improves significantly.
December 3, 2018
Cyprus: 2018 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Cyprus
Description: Cyprus is recovering strongly from the 2012–13 crisis. GDP growth is projected to remain above 4 percent in 2018–19, buoyed by services and foreign-financed construction. Unemployment is rapidly declining while large fiscal primary surpluses are putting public debt back on a declining path. Nevertheless, crisis legacies continue to weigh on the banking system. In early 2018, difficulties in the Cyprus Cooperative Bank led the authorities to intervene, albeit at a significant fiscal cost. In the process, a package of legislative measures strengthening the insolvency and foreclosure regime was also approved, which is now catalyzing the cleanup of bank balance sheets. These developments have led to a sovereign ratings upgrade, restoring Cyprus’s investment grade status.