Country Reports
2022
July 27, 2022
Ireland: Financial Sector Assessment Program-Technical Note on Oversight of Market-Based Finance: Investment Funds and Special Purpose Entities
Description: This considers the regulation and supervision of the market-based finance (MBF) sector in Ireland. Ireland has made good progress in implementing MBF-relevant recommendations from the 2014 and 2016 Financial Sector Assessment Programs, but some gaps remain. As the integrated regulator for the financial services sector, the Central Bank would benefit from greater formal legal independence, stronger enforcement powers and more flexibility on individual compensation to attract and retain scarce talent. There is scope for the Central Bank to leverage its expertise and experience to promote further EU convergence on MBF oversight. Closing data gaps would further enhance the Central Bank’s robust regulation and supervision of the MBF sector. The Central Bank should intensify its work to assess and mitigate financial stability risks of MBF. Finalization of work already under way on investment fund pricing errors should be prioritized, while oversight of SPEs deserves regulatory and supervisory attention. The introduction of a comprehensive framework for pricing errors will lay the foundations for greater investor protection and more consistent industry practices. Oversight of special purpose entities has improved from the perspective of statistical analysis, but more efforts are needed to strengthen governance practices.
July 27, 2022
Ireland: Financial Sector Assessment Program-Technical Note on Oversight of Fintech
Description: This Technical Note on Oversight of Fintech explains that Ireland’s fintech sector is growing in importance through the entry of innovative new players and digital transformation of incumbents’ business models and products. This note seeks to identify risks arising from fintech as well as policy responses by authorities. The Irish Government has adopted a Strategy implemented by annual action plans for the development of Ireland’s international financial services sector that includes several initiatives of relevance to fintech. The Central Bank has an Innovation Hub that provides a single point of contact for stakeholders on fintech-related issues. Under the EU’s passporting framework host regulators receive limited information on the activities that passporting entities carry out in their jurisdiction. Incumbent retail banks in Ireland are dedicating significant resources to digital transformation, while fintechs are enlarging consumer choice through innovative new services. The Central Bank should further intensify its efforts to monitor developments on crypto-assets through systematic data collection within the scope of its powers and, where unacceptable risks remain, issue carefully targeted warnings and investor communications.
July 27, 2022
Ireland: Financial Sector Assessment Program-Technical Note on Insurance Regulation and Supervision
Description: This Technical Note highlights Ireland’s Insurance Regulation and Supervision. Ireland’s insurance sector is characterized by high penetration and density in both the life and the non-life sector, which, however, stems largely from outward cross-border business. Irish insurers have proved to be resilient during the coronavirus disease 2019 pandemic, although the full effects have yet to be seen. Primary drivers of solvency ratios have been financial market and interest rate movements affecting insurers’ investment portfolios and liability valuations. The Central Bank has been expanding its analysis of climate risks and corresponding risk management practices in the financial sector. There is scope for the Central Bank to leverage its expertise and experience to promote further EU convergence on insurance oversight. The Central Bank has been very active in policy discussions at the European Insurance and Occupational Pensions Authority and is well placed to take a leading role in the efforts to achieve consistent application of EU legislation, and generally supervisory convergence, on the supervision of cross-border business; the supervision of intra-group transactions and group concentrations; and the supervision of captives.
July 26, 2022
Paraguay: Technical Assistance Report-Bank Resolution Framework and the Deposit Guarantee Fund
Description: This paper discusses Paraguay’s Technical Assistance report on bank resolution framework and the deposit guarantee fund. The mission identified several areas where the existing deposit guarantee fund and bank resolution framework could be enhanced. The Central Bank of Paraguay should consider developing an ongoing process of recovery and resolution planning and underpin it in its regulatory framework, in line with international modern practices Coordination with members of the financial safety net of other jurisdictions is key to ensuring adequate crisis preparedness during normal times and enabling adequate coordination of crisis management measures if there are concerns about the viability of a foreign-owned bank with operations in Paraguay. A one-voice method of communication with the public should be considered, and advance preparation is paramount to ensure a smooth process for communications in the event of a crisis situation. The resolution framework should stipulate clear and expeditious access to temporary funding, based on financial stability considerations, in situations where private sector funding has been exhausted or cannot achieve resolution objectives.
July 26, 2022
Seychelles: Selected Issues
Description: This Selected Issues paper considers the containment and closure policies implemented in Seychelles—a Small Island Developing State (SID) highly dependent on tourism—and the resultant impact on Gross Domestic Product (GDP) in 2020–21. The assessment compares the economic performance of Seychelles against a set of other SIDS also dependent on tourism. The study adopts two econometric methods. The first method constructs a reference country to allow comparison against Seychelles, while the second method is a panel data regression. The analysis indicates that containment and closure policies contribute to a stronger GDP decline, as would be the case without such policies. In the following sections, the paper first explores how coronavirus disease 2019 evolved in Seychelles and describes the authorities' key responses. Secondly, we review the economic indicators of Seychelles. Thirdly, the methodology and the results are explained, followed by some conclusions. The authorities need to be mindful that containment and closure policies adversely impact economic activity should they be implemented again for a prolonged period—both within and across countries.
July 26, 2022
Seychelles: 2022 Article IV Consultation, Second Review Under the Extended Fund Facility Arrangement, and Request for Modification of Performance Criteria and Indicative Targets-Press Release; Staff Report; and Statement by the Executive Director for Seychelles
Description: This paper presents Seychelles’ 2022 Article IV Consultation, Second Review under the Extended Fund Facility Arrangement, and Request for Modification of Performance Criteria and Indicative Targets. Seychelles’ economic recovery in 2021 vastly outperformed projections, fueled by a faster-than-expected rebound of the tourism sector. The authorities are committed to reducing debt vulnerabilities and creating fiscal space to address future risks. The structural reform agenda will continue to focus on revenue administration, public financial management, and governance, including digitalization, state-owned-enterprise reform, and climate change adaptation and mitigation policies. Monetary policy remains appropriately accommodative, and the authorities are committed to closely monitoring inflationary pressures. The authorities are committed to reducing debt vulnerabilities and creating fiscal space to address future risks. The structural reform agenda will continue to focus on revenue administration, public financial management, and governance, including digitalization, state-owned enterprise reform, and climate change adaptation and mitigation policies. The country remains vulnerable to climate change.
July 26, 2022
Arab Republic of Egypt: Ex-Post Evaluation of Exceptional Access Under the 2020 Stand-By Arrangement-Press Release; Staff Report; and Statement by the Executive Director for Arab Republic of Egypt
Description: This paper highlights Arab Republic of Egypt’s Ex-Post Evaluation of Exceptional Access under the 2020 Stand-By Arrangement (SBA). In early 2020, the Egyptian authorities launched a broad policy response to address the immediate and severe economic disruption caused by the coronavirus disease 2019 (COVID-19) pandemic, which threatened to reverse Egypt’s hard-won achievements in regaining macroeconomic stability. The SBA achieved its primary objective of maintaining macroeconomic stability in the context of the disruption from the COVID-19 pandemic. Policy implementation under the SBA was broadly in line with program objectives, even as exchange rate variability remained limited. While the Egyptian economy has successfully weathered the COVID-19 shock, the external and debt vulnerabilities that existed prior to the crisis remain high. The focused structural reform agenda supported by the SBA was fully executed, but decisive progress on deeper reforms is needed to foster private sector development, improve governance, and reduce the role of the state. The program design contributed to the successful completion of the SBA, yet certain aspects could have been reconsidered.
July 25, 2022
Benin: 2022 Article IV Consultation and Requests for an Extended Arrangement under the Extended Fund Facility and an Arrangement under the Extended Credit Facility-Press Release; Staff Report; Staff Statement; and Statement by the Executive Director for Benin
Description: This paper presents Benin’s 2022 Article IV Consultation and Requests for an Extended Arrangement under the Extended Fund Facility (EFF) and an Arrangement under the Extended Credit Facility (ECF). Revenue mobilization—the cornerstone of the authorities’ reform agenda—will, together with better spending prioritization and improved efficiency, help create the much-needed fiscal space to support Benin’s significant development and security needs while preserving debt sustainability. A steadfast implementation of the recently adopted action plan for Anti Money Laundering/Combating the Financing of Terrorism and further strengthening the rule of law and governance will consolidate the foundations of sustained private sector-led growth that benefits all Beninese. Considering Benin’s relatively large level of income inequality, the authorities’ IMF-supported EFF/ECF is rightly focused on development with a human face through enhanced access to basic public services and improved state presence in vulnerable areas, consistent with the authorities “civilian approach” to mitigating security risks. Ongoing efforts to enhance resilience to climate change are also important. Achieving these ambitious goals will require continued commitment to clearly communicated reforms and strong technical and financial support from Benin’s development partners to complement large and front-loaded IMF support.
July 25, 2022
Benin: Selected Issues
Description: This Selected Issues paper on Benin focuses on scaling up public expenditure for inclusive growth. Poverty and inequality remain relatively high in Benin despite robust economic growth over the past decade, partly reflecting the fact that public spending on education, health and social protection has not kept up with demographic trends. Achieving the Sustainable Development Goals will require significant increases in public spending going forward. Underspending on public health sector reflects low budget appropriations and weak implementation of capital expenditure. School enrollment rates have overall improved, with significant variations across education levels. Benchmarking and frontier analyses, respectively, suggest that there is scope to increase the level of spending on education and its efficiency. At the sectoral level, many measures could be considered to improve the inclusiveness of the government intervention. Scaling up public spending, while preserving fiscal sustainability, is needed to address large social and infrastructure gaps.
July 22, 2022
United Arab Emirates: Technical Assistance Report - Liquidity Management and Forecasting
Description: This paper presents United Arab Emirates’ (UAE) Technical Assistance report on liquidity management and forecasting. The new Dirham Monetary Framework is largely consistent with an operational framework under a fixed exchange rate regime and capital mobility. The foreign exchange swap facility should be discontinued once the eligible collateral for the Overnight Lending Facility is broadened to include US dollars. Some improvements can be introduced to the structural open market operations (OMO). The Central Bank of the UAE (CBUAE) fine-tuning OMOs should be implemented to manage unexpected liquidity fluctuations during the Reserve Maintenance Period. Reserve requirements in the UAE are mainly a tool for monetary policy and liquidity management purposes but their nonremuneration is acting as an indirect tax on financial intermediation. The CBUAE should implement the designed state-of-the-art, full-fledged forecasting framework for each of the three main autonomous factors, as well as a reconciliation strategy to forecast the sum of the autonomous factors with an estimation of the confidence interval. The new liquidity forecasting framework provides several important features for liquidity management.