Country Reports
2024
July 30, 2024
Cabo Verde: Fourth Review of the Arrangement Under the Extended Credit Facility and First Review of the Arrangement Under the Resilience and Sustainability Facility and Request of Rephasing of Availability Dates-Press Release; and Staff Report
Description: This paper discusses Carbo Verde’s Fourth Review under the Extended Credit Facility Arrangement, Request for Modifications of Performance Criteria, and First Review of the Arrangement under the Resilience and Sustainability Facility (RSF) and Request of Rephasing of Availability Dates. Macroeconomic performance in 2023 was strong, with real gross domestic product (GDP) growth of 5.1 percent, a strong primary fiscal surplus, low inflation, and a prudent level of reserves to protect the peg. The public debt-to-GDP ratio continues on a downward path, and the financial sector remains resilient. The authorities are improving the monetary and financial policy frameworks. Reforms to foster productivity and diversification underpin the authorities’ growth and climate resilience strategy. The RSF arrangement supports strong reforms in the energy-water nexus with the aim of facilitating private sector development, building the appropriate infrastructure, reducing costs, and managing the energy transition. The near-term outlook is favorable despite some downside risks. Reforms focus on climate-resilience, preserving debt sustainability, advancing strong reforms in the energy-water nexus and managing the energy transition, while targeting social spending to protect the most vulnerable from the costs of the transition. State-owned enterprises reforms are key to reducing fiscal risks, and improving inter-island connectivity is critical for competitiveness.
July 30, 2024
Euro Area Policies: 2024 Annual Consultation-Press Release; Staff Report; and Statement by the Executive Director for Member Countries
Description: The 2024 Article IV Consultation explains that the euro area is recovering gradually, with a modest acceleration of growth projected for 2024, gathering further speed in 2025. Increasing real wages together with some drawdown of household savings are contributing to consumption, while the projected easing of financing conditions is supporting a recovery in investment. A modest pickup in growth is projected for 2024, strengthening further in 2025. This primarily reflects expected stronger consumption on the back of rising real wages and higher investment supported by easing financing conditions. Inflation is projected to return to target in the second half of 2025. The economy is confronting important new challenges, layered on existing ones. Beyond returning inflation to target and ensuring credible fiscal consolidation in high-debt countries, the euro area must urgently focus on enhancing innovation and productivity. Higher growth is essential for creating policy space to tackle the fiscal challenges of aging, the green transition, energy security, and defense.
July 29, 2024
Republic of Croatia: 2024 Article IV Consultation-Press Release; and Staff Report
Description: The 2024 Article IV Consultation with the Republic of Croatia highlights that the economy has performed strongly despite consecutive external shocks. The impressive post-pandemic growth during 2021–2022 moderated to 3.1 percent in 2023, still among the highest in the euro area. Inflation has decelerated considerably since early 2023 but still persists above the euro area average, owing to elevated food and services inflation amid a tight labor market. The authorities should immediately withdraw broad-based cost-of-living measures and implement their plan to meaningfully reduce the deficit from 2025 and return to a structural primary balance by 2027. Prudence and decisive reforms are warranted to build buffers for future shocks and long-term spending needs. The financial sector has weathered well the recent monetary tightening, and systemic risks appear manageable. Close monitoring of potential build-up of risks in the real estate sector is warranted. The multidimensional nature of labor shortages requires coordinated policies to foster labor participation, reduce skills mismatch, facilitate labor mobility, and reduce net emigration.
July 29, 2024
Burkina Faso: Selected Issues
Description: This Selected Issues paper highlights trends, impacts, and policy implications in Burkina Faso. Regional insecurity has also created increased cross-border displacement, both into and out of Burkina Faso. Burkina Faso has devised several policy responses, including in cooperation with international partners. Despite these measures, the persistent crisis of forced displacement means that the need for humanitarian assistance remains. A successful strategy for addressing the displacement crisis should be broad-based in terms of partners and approaches. Given the country's economic and financial challenges, an in-depth understanding is needed of the economic impact of forced displacement and possible solutions. In other countries, studies show positive economic outcomes to host regions of forced displacement. The inclusion of forced displaced persons in the Unified Social Register and national social nets programs would facilitate the implementation of assistance and, along with other national repositories help improve urban management and budget planning.
July 29, 2024
The Federal Democratic Republic of Ethiopia: Request of an Arrangement Under the Extended Credit Facility-Press Release; Staff Report; and Statement by the Executive Director for The Federal Democratic Republic of Ethiopia
Description: This paper presents The Federal Democratic Republic of Ethiopia’s Request for an Arrangement under the Extended Credit Facility. The four-year financing package will support the authorities’ Homegrown Economic Reform Agenda to address macroeconomic imbalances, restore external debt sustainability, and lay the foundations for higher, inclusive, and private sector-led growth. The economic program envisages a comprehensive policy package to stimulate private sector activity and increase economic openness to promote higher and more inclusive growth. Supportive macroeconomic policies, including the elimination of monetary financing of government deficits, monetary policy tightening, and prudent fiscal management, will need to be sustained to keep inflation in check, ensure a successful implementation of the market-determined exchange rate, and durably address exchange rate shortages. The authorities are advancing reforms to ensure the sustainability of public finances. The authorities’ ambitious and comprehensive home-grown structural reform agenda will focus on better governance and public service delivery, competitiveness, and the business climate, to stimulate private sector-led growth and contribute to poverty reduction and raising living standards.
July 29, 2024
Burkina Faso: 2024 Article IV Consultation and First Review Under the Extended Credit Facility and Financing Assurances Review-Press Release; Staff Report; and Statement by the Executive Director for Burkina Faso
Description: This paper focuses on Burkina Faso’s 2024 Article IV Consultation and First Review under the Extended Credit Facility Arrangement and Financing Assurances Review. Burkina Faso’s performance under the program has been positive. All quantitative performance criteria, all indicative targets but one, and most structural benchmarks for the first review were met; some structural benchmarks were implemented with delay. Burkina Faso faces multiple development challenges, including heightened security conditions, climate change, and food insecurity. The authorities are progressing in their fiscal consolidation efforts, structural reforms and fiscal governance measures, and the creation of fiscal space for priority spending. Growth accelerated in 2023 to 3.6 percent of gross domestic product, supported by a rebound in construction and expansion of the tertiary sector. Inflation significantly decreased, and the fiscal and debt positions improved. Growth is projected at 5.5 percent in 2024 but remains below potential in the medium term, and a lasting recovery is contingent on bringing security under control.
July 29, 2024
Republic of Croatia: Selected Issues
Description: This Selected Issues paper explains corporate sector balance sheet vulnerabilities in Croatia. It serves as a background analysis to the systemic risk assessment presented in the staff report and follows established approaches to stress-test the corporate sector. Croatian firms have significantly improved their balance sheets since the prolonged recession after the Global Financial Crisis, helped by deleveraging and narrowing country risk premium as Croatia advanced its euro adoption agenda. The calibration of shocks follows the macro-financial scenarios of the 2023 EU-wide banking sector stress tests by the European Banking Authority. Micro-level simulations confirm the resilience of the corporate sector against adverse shocks to profitability and financing costs. The well-capitalized banking sector overall is also found to have buffers to absorb negative spillovers from the corporate sector. The simulated results suggest that shocks to nonfinancial corporations (NFC) could significantly raise banks’ nonperforming loans. The declining borrowing costs and improving financial strength of NFCs in Croatia point to the need to examine both financing and nonfinancing related obstacles.
July 29, 2024
Republic of Congo: Selected Issues
Description: This Selected Issues paper focuses on the macroeconomic impacts of government domestic arrears in the Republic of Congo. Authorities have intensified mitigating efforts including improving fiscal space to accelerate repayment, improving debt transparency to allow for rapid recognition of arrears, and launching major reforms to improve prevention. Looking ahead, maintaining the pace of reform will be crucial. Priorities include further strengthening of fiscal buffers to ensure timely repayment, enhance debt coverage and transparency reforms to allow a holistic view of public debt, accelerating debt and PFM reforms to allow better management and control. Repayment efforts have accelerated but have failed in reducing arrears stock due to the inclusion of new stock of arrears. The effective implementation of the restructuring of the debt management office and related reforms especially the hiring of staff and their training to improve capacity and the operation of a new procedure manual will be crucial to enhance the effectiveness of the debt management office.
July 29, 2024
Republic of Congo: 2024 Article IV, Fifth Review Under the Three-Year Arrangement Under the Extended Credit Facility, Requests for Modification of Performance Criteria, Waivers of Nonobservance of Performance Criteria, and Financing Assurances Review-Press Release; Staff Report; and Statement by the Executive Director
Description: This paper discusses Republic of Congo’s 2024 Article IV Consultation, Fifth Review under the Three-year Arrangement under the Extended Credit Facility, Requests for Modification of Performance Criteria, Waivers of Nonobservance of Performance Criteria, and Financing Assurances Review. Economic recovery continued amid challenges from inflationary pressures and an uncertain global environment. Program performance was broadly satisfactory, but structural reforms continued to experience delays. Sustained reform implementation spanning public financial and debt management, governance, and transparency will be critical to attaining higher, more resilient, and inclusive growth. The authorities are encouraged to maintain fiscal consolidation efforts. Raising financial inclusion, ensuring steadfast implementation of state-owned enterprise reforms, and adapting to risks emanating from climate change will also support inclusive and resilient growth, in particular over the medium term.
July 24, 2024
Republic of Lithuania: 2024 Article IV Consultation-Press Release; and Staff Report
Description: Lithuania has experienced fast income convergence over the past two decades and the economy is projected to return to growth this year after a shallow recession. However, higher inflation differentials following the shock triggered by Russia’s invasion of Ukraine have had an impact on competitiveness, even though Lithuania entered this crisis with an undervalued real effective exchange rate. At the same time, global fragmentation, long-term spending pressures, eroded corporate profitability, and pre-existing structural challenges in education, healthcare and the labor market continue weighing on productivity and growth. Thus, Lithuania needs prudent policies and decisive structural reforms to support sustained productivity growth and ensure higher living standards and continued convergence.