Country Reports
2017
September 18, 2017
Japan: Financial Sector Assessment Program-Technical Note-Long-Term Challenges for Financial Intermediation
Description: This Technical Note analyzes and quantifies the effect of aging in Japan—both at the national and regional levels—on the nature of financial intermediation. Mounting demographic headwinds constitute a major challenge for regional financial institutions in Japan. According to prefectural population projections and econometric estimates, the impact from demographic headwinds is likely to intensify significantly over the next two decades. Financial sector policies should aim to address the constraints to financial access by further promoting risk-based lending and asset-based lending. Banks should continue to be encouraged to build capacity for risk assessment to do more risk-based lending.
September 18, 2017
Japan: Financial Sector Assessment Program-Technical Note-Regulation and Supervision of Securities
Description: This Technical Note discusses the findings and recommendations made in the Financial Sector Assessment Program for Japan in the areas of regulation and supervision of securities firms. The supervision of the two major Japanese securities groups and the Japanese subsidiaries of global banking groups deserves special attention, given the domestic and cross-border interconnectedness of these firms. The authorities should continue to ensure that the supervisory teams for the major Japanese groups have access to sufficient number of experienced staff. It is also important to continue to enhance the existing international cooperation in the supervision of Japanese firms’ overseas operations and foreign-owned firms’ activities in Japan.
September 18, 2017
Japan: Financial Sector Assessment Program-Technical Note-Systemic Risk Analysis and Stress Testing the Financial Sector
Description: This Technical Note discusses the results of stress testing of the financial sector in Japan. The Japanese financial system appears generally resilient to short-term risks, but pockets of vulnerability exist. Overall, banks appear to have sufficient capital and liquidity buffers to cope with a scenario of severe recession owing to disruptions in global trade, and accompanied by a sharp increase in interest rates and risk premiums, and a decline in equity prices. Spillovers within the system also appear to be limited. At the same time, resilience is not equal among all institutions included in the analysis. Some life insurance companies and regional banks may need to strengthen their capital buffers.
September 15, 2017
Portugal: Selected Issues
Description: This paper discusses that the average investment growth needed for Portugal was to achieve the 2-percent and 2.5-percent real GDP growth in the medium term. It is likely that the growth rate of investment must significantly exceed the projected 4.9 percent in order to achieve the GDP growth path envisaged in the 2017 Stability Program. Specifically, per staff estimates, investment needs to grow at around 8.5 percent per year in case the TFP growth remains at -0.26 percent. The challenges confronting Portuguese banks were discussed in the 2016 Article IV staff report, which highlighted low profitability and weak asset quality as key concerns. The regulatory environment has exerted positive pressure insofar as the review of business models has now become an integral part of the supervisory agenda, especially for Single Supervisory Mechanism (SSM)-supervised banks. Pursuant to the Capital Requirements Directive IV (CRD-IV), banks’ business models are considered in the Supervisory Review and Evaluation Process (SREP) performed by the supervisory authorities not only to determine capital and liquidity requirements but also to assess banks’ recovery plans.
September 15, 2017
Portugal: 2017 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Portugal
Description: This 2017 Article IV Consultation highlights that Portugal has made notable progress over the past year in reducing uncertainty over near-term risks. The exit from the Excessive Deficit Procedure in 2017, together with a marked improvement in stability and confidence in the banking system, have helped bolster investor confidence and contributed to a sharp narrowing in sovereign debt spreads since mid-March. The near-term growth outlook has also improved considerably as the ongoing recovery continues to gain momentum, with a pickup in exports and investment alongside the continued growth in private consumption. Tourism remains a key driver of growth, but has also been accompanied by a broad-based pickup in exports of goods in recent quarters.
September 15, 2017
Uganda: Technical Assistance Report-Implementing the Public Financial Management Bill
Description: This Technical Assistance Report discusses recommendations for implementing the Public Financial Management (PFM) Bill in Uganda. The finalization of the PFM Bill has reached an advanced stage with Parliamentary approval expected in the coming months. The IMF mission strongly recommends that the petroleum revenue management provisions in the Bill are revisited. In particular this should include clearly defining the nature of the funds and its objectives. The reporting arrangements should also be clarified and the specialist audit arrangements specified. Finally, the Bill should be enhanced to ensure that investment risks are limited and to protect against its use as a development fund.
September 15, 2017
Uganda: Technical Assistance Report-Drafting the Public Finance Management Regulations
Description: This Technical Assistance Report proposes draft regulations to address issues in the provisions of the Public Finance Management Bill 2012. The draft regulations propose a virement regime which serves to protect the composition of the budget, in particular prevention of virement between development and recurrent spending which will be particularly important in light of the new fiscal environment. It is also proposed to further strengthen the expenditure controls through a requirement to regularize excess expenditures through the contingencies fund and requiring reporting of outstanding payments.
September 15, 2017
Uganda: Technical Assistance Report-Developing the Charter for Fiscal Responsibility
Description: This Technical Assistance Report discusses recommendations for developing a “Charter for Fiscal Responsibility” in Uganda. Publication of a “Charter for Fiscal Responsibility” at the start of each new Parliament is a requirement of Uganda’s new Public Financial Management Act. The Charter should set out measurable medium-term objectives for fiscal policy, and explain the methodology, data, and procedures by which performance against the objectives would be measured. The Charter should also be used to develop transparent fiscal reporting requirements and establish the role of fiscal objectives in underpinning the annual budget process.
September 15, 2017
Uganda: Technical Assistance Report-Enhancing the Performance of Public Investment Management
Description: This Technical Assistance Report discusses recommendations for enhancing the performance of public investment management in Uganda. The current public investment program (PIP) is overextended and a stock-take is required (by September 2017) as the basis for further decisions. Cabinet endorsement of important decisions on the PIP is needed to provide a framework for subsequent planning, budgeting and decision making by the Ministry of Finance, Planning and Economic Development (MoFPED), the National Planning Authority (NPA), and Ministries, Departments, and Agencies. To inform the Cabinet decision on the PIP, a comprehensive review of the PIP should be conducted each September/October jointly between the MoFPED, the NPA and the sectors concerned under the auspices of the Development Committee.
September 15, 2017
Uganda: Technical Assistance Report-Managing and Preventing Expenditure Arrears
Description: This Technical Assistance Report discusses recommendation for managing and preventing expenditure arrears in Uganda. There is need to reconcile the verified stock of arrears with those reported in the annual financial statements. The verification for Budgetary Central Government must be completed, and mechanisms for regular reporting and verification of arrears by local government and the broader public sector must be established. It is also recommended to develop and publish an arrears clearance strategy including prioritization criteria, liquidation policy and institutional responsibility for monitoring and clearance of arrears.