Country Reports
2017
December 14, 2017
Islamic Republic of Afghanistan: 2017 Article IV Consultation and Second Review under the Extended Credit Facility Arrangement, and Request for Modification of Performance Criteria-Press Release; Staff Report; and Statement by the Executive Director for the Islamic Republic of Afghanistan
Description: This 2017 Article IV Consultation highlights that the real GDP of Afghanistan grew by 2.4 percent in 2016 thanks to higher agricultural output. For 2017, growth is projected at 2.5 percent and at 3 percent for 2018. This is below the rate of growth needed to reduce unemployment, and is contingent on an improvement in confidence, implementation of reforms, and continued strong donor support. Consumer price inflation remains moderate and is expected to average 6 percent in 2018. Afghanistan has also made progress in strengthening the country’s anti-corruption framework, and its efforts in antimonetary laundering and counter financing of terrorism resulted in the recent exit from the Financial Action Task Force’s monitoring process.
December 13, 2017
Uganda: Technical Assistance Report-Fiscal Regimes for Extractive Industries: Next Phase
Description: This Technical Assistance Report discusses the advice provided by the IMF staff to the authorities of Uganda regarding extractive industry fiscal regimes. As Uganda’s portfolio of projects diversifies in the oil sector, the minimum take could be adjusted to allow for possible bonus bids, and for higher shares in the most successful projects. The royalty design also needs to take account of new provisions for distribution of a portion to local governments. The cost recovery limit could be set at 70 percent after deduction of royalty. In addition to work program, either a signature bonus or an upper tier of production sharing should form the bid variable in the licensing round, with all other items fixed and non-negotiable.
December 13, 2017
Uganda: Technical Assistance Report-Implementing Fiscal Regimes for Extractive Industries: Technical Notes
Description: This Technical Assistance Report discusses the advice provided by the IMF staff to the authorities of Uganda regarding implementation of fiscal regimes for extractive industries. The report considers options on how to conduct future licensing rounds, including possible bid variables and bid evaluation methods. It provides detailed comments on the draft model Production Sharing Agreement, along with simulations of its fiscal terms. The report also explains how crude oil price into the refinery is likely to be a negotiated outcome using the pipeline tariff as a guide.
December 13, 2017
Finland: 2017 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Finland
Description: This 2017 Article IV Consultation highlights that Finland’s economic growth has picked up considerably, broadening to exports and equipment investment, and the current account is back to surplus. The economic recovery is expected to remain strong in the near term, but potential growth is constrained by labor market rigidities and aging. The IMF projects growth of 2.8 percent in 2017 and 2.3 percent in 2018. Better-than-expected fiscal outcomes in 2016 are projected to continue in 2017, but the public finances face long-term challenges from a declining working age population and escalating age-related spending. Avoiding a procyclical fiscal stance would help rebuild buffers over the medium term.
December 13, 2017
Finland: Selected Issues
Description: This paper discusses Finland’s public sector balance sheet. The public sector balance sheet approach expands analysis of public finances beyond government debt to also include government assets, public corporations, and pension liabilities. For Finland, it shows that static public sector net worth is negative at some 160 percent of GDP. This implies that Finland’s future fiscal balances and policies will have to be sufficiently strong to compensate, and also to address future spending pressures from rising health and long-term care. The intertemporal balance sheet shows that Finland’s current medium-term fiscal framework meets this criterion—but only if health and social services reform achieves the targeted savings in public spending during the 2020s. In light of numerous risks it would be prudent to use the present economic upswing to make early headway in rebuilding buffers. Finland has a track record of prudent fiscal policy. During good economic times, the authorities have run sizable fiscal surpluses.
December 13, 2017
Islamic Republic of Mauritania: Three-Year Arrangement under the Extended Credit Facility-Press Release; Staff Report; and Statement by the Executive Director for Islamic Republic of Mauritania
Description: This paper discusses Mauritania’s Request for a Three-Year Arrangement Under the Extended Credit Facility (ECF). The economic outlook is positive, but debt remains a concern. Near-term prospects are promising—supported by some improvement in the terms of trade, foreign direct investment in the extractive sector, planned structural reforms, and growth-enhancing public investment. Risks are balanced: on the upside, possible development of a recently discovered off-shore gas field could be a game-changer starting in 2021. On the downside, the economy remains highly vulnerable to lower metals prices, weather-related events, and regional security developments. The IMF staff supports the authorities’ request for the ECF arrangement.
December 13, 2017
Albania: 2017 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Albania
Description: This 2017 Article IV Consultation highlights that Albania’s economy continues to strengthen, benefitting from rising domestic demand, large energy-related foreign direct investment (FDI), and a recovery in key European Union (EU) trading partners. The declining output gap and pass-through of higher external inflation have pushed up inflation to just under 2 percent. Short-term external vulnerabilities are limited, as the current account deficit is predominantly funded by concessional borrowing and large FDI inflows, while official foreign reserves are ample. The medium-term outlook remains favorable. GDP growth is projected to accelerate to about 4 percent, driven by continued strong domestic demand, reforms that improve the business climate, and a strengthening EU recovery.
December 13, 2017
Albania: Selected Issues
Description: This paper explores Albania’s current account (CA) deficit that improved in 2016, but remains sizable. The EBA-Lite model results indicate that the external position is moderately weaker than implied by fundamentals and desirable policy settings. Adjusting for Albania’s specific circumstances, the current account gap is estimated at -1.0 percent and the real effective exchange rate is overvalued by about 6 percent, reflecting Albania’s low national saving and large FDI inflows. Though Albania has benefitted from the recent tourism boom in the region, the outlook for exports remains challenging. Despite its cost competitiveness, exports are narrowly concentrated in a few low-value added sectors while new investments in the nonenergy tradable sector are limited. To close Albania’s competitiveness gap and strengthen its external position, the authorities should complete key infrastructure projects to reduce transportation costs and address energy sector reliability; increase domestic savings; improve governance and the rule of law; and raise labor market efficiency by reducing skills shortages.
December 11, 2017
Sudan: 2017 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Sudan
Description: This 2017 Article IV Consultation highlights that the economic conditions in Sudan have been challenging since the secession of South Sudan in 2011 and the loss of the bulk of oil production and exports. The authorities have implemented partial policy adjustments to help stabilize the economy and reestablish growth, most recently by allowing for greater exchange rate flexibility and reducing fuel subsidies. The current account deficit (cash basis) is expected to decline by 3.25 percentage points to 2.75 percent of GDP in 2017. Data for the first half of 2017 indicate weaker real domestic demand, partly offset by a strengthening contribution from net exports.
December 11, 2017
Sudan: Selected Issues
Description: This paper explains that in Sudan, the public information campaign should be launched as early as possible following a decision to phase out subsidies. This campaign should comprise wide-ranging consultations with all stakeholders, and should inform the public about the high costs and unequal distribution of the subsidy benefits. Cash transfers could be used to mitigate the impact of fuel subsidy removal on the lowest income groups. In the case of the removal of subsidies on fuel products, it is estimated that the cost of compensating the lowest income groups could be achieved at a cost of less than 1 percent of GDP a year. Two decades of economic sanctions led to the exit of most Correspondent Banking Relationships (CBRs) from Sudan, and weighed heavily on trade, investment, growth, and humanitarian relief. In 2017, the United States revoked trade and financial sanctions, while sanctions imposed by the UN, and other countries, including the EU, remain applicable.