Country Reports
2022
July 21, 2022
Uruguay: Central Bank Transparency Code Review
Description: This paper highlights Uruguay’s Central Bank Transparency Code (CBT) Review. The Central Bank of Uruguay (BCU) is implementing transparency practices that are broadly aligned with the good practices for central banks. Improving communication with domestic and international stakeholders is a significant pillar of the medium-term strategic plan. The well-developed communication framework and architecture were assessed to be comprehensive in this IMF CBT review. While general information about its legal structure and mandate are disclosed, enhanced transparency about the scope and depth of institutional, personal, and financial autonomy could be improved. The annual report and website contain the core information, but some important elements require complete information or simpler translations from the legal language. Additional transparency in some areas of governance is needed to enhance institutional accountability. The BCU has developed a transparent and efficient system to safeguard the rights of financial consumers. The BCU has put in place a model system on consumer protection that inspires public confidence and trust.
July 21, 2022
Cabo Verde: Request for an Arrangement Under the Extended Credit Facility-Press Release; Staff Report; and Statement by the Executive Director for Cabo Verde
Description: This paper presents Cabo Verde’s Request for an Arrangement under the Extended Credit Facility. Cabo Verde’s economy is facing significant challenges associated with the lingering effects of the global pandemic, as well as rising food and fuel prices due to the war in Ukraine and the impact of the ongoing five-year drought. The financing package will help mitigate the lingering impact of the coronavirus disease 2019 pandemic and the spillover effects of the war in Ukraine; reduce the fiscal deficit and preserve debt sustainability; protect vulnerable groups; and support a reform agenda that leads to higher and more inclusive growth. Key policy actions under the program include measures to boost revenue and improve the efficiency of spending, strengthen state-owned enterprises to mitigate fiscal risks, as well as measures to continue modernizing the monetary policy framework and safeguarding financial stability. Steadfastly implementing the authorities’ development plan will improve the business environment and help support private sector-led growth. Considering Cabo Verde’s high vulnerability to the effects of climate change, the planned bold steps to climate adaptation will be key to boost the economy’s resilience and growth potential.
July 21, 2022
Singapore: 2022 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Singapore
Description: This 2022 Article IV Consultation discusses that Singapore’s skillful containment measures, effective vaccination campaign and decisive policy support helped the economy to recover impressively. Growth is expected to remain above potential in the near term and broaden across sectors, supported by widespread vaccinations and pent-up demand as the economy reopens. The tight macroprudential stance should be maintained, and further tightened as needed. This combined with the authorities’ plans to ramp up housing supply would help ensure a soft landing in residential real estate prices and prevent a further rise of systemic financial risks. Should downside risks materialize, Singapore can continue to deploy its ample fiscal buffers to cushion the economic impact, with targeted fiscal support continuing to be the first line of defense. The authorities are pivoting to post-pandemic and longer term priorities. Recent initiatives, included as part of the FY2022 budget, to accelerate transition toward a smarter, greener, and more inclusive economy post-pandemic are welcome.
July 20, 2022
Germany: 2022 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Germany
Description: This 2022 Article IV Consultation with Germany discusses that before Russia’s invasion of Ukraine, economic activity in Germany was firming up. Uncertainty is very high, with risks to the baseline growth forecast skewed downward and risks to the inflation forecast skewed upward. The greatest threat is a persistent shut-off of the remaining Russian gas exports to Europe, which could cause sizable reductions in German economic activity and increases in inflation. In response to surging energy prices, the government is expanding income support for vulnerable households, cutting fuel taxes, and providing liquidity support to firms. Persistently-high inflation and fears of a de-anchoring of inflation expectations can prompt major central banks to tighten policies faster than currently expected, potentially triggering a sharp tightening in financial conditions and corrections in asset prices. The 2022 Financial Sector Assessment Program assesses the German banking sector generally resilient to shocks, but points to pockets of vulnerability and downside risks that require close monitoring and call for some additional buffers for less capitalized banks. Given continued rapid house price gains, the recently activated capital-based measures should be supplemented with borrower-based measures, such as supervisory guidance on a loan-to-value cap.
July 20, 2022
Germany: Selected Issues
Description: This Technical Assistance Report on Montenegro highlights Public Investment Management Assessment. Due to the importance of the tourism sector, the pandemic has had a deep economic impact. In addition, as government debt already exceeds one hundred percent of gross domestic product, fiscal space to increase public investment is limited. In this context, a strengthened public investment management (PIM) framework would contribute to maximize its impact on economic growth. Recent trends in capital expenditures and capital stock signal that there is room for improving the efficiency of public investments in Montenegro. The authorities have introduced several reforms in recent years to strengthen the PIM framework. Through the reform efforts, Montenegro has developed a stronger PIM framework but there is still room for improvement. Notwithstanding these efforts, there is significant room to strengthen public investment management in Montenegro. IMF estimates indicate that there is an efficiency gap of 35 percent. Public investment could better support the economic recovery if specific actions are taken to improve the PIM framework.
July 20, 2022
Germany: Financial System Stability Assessment
Description: This paper reviews Germany’s Financial System Stability Assessment report. The financial sector has weathered the impact of the pandemic and the war in Ukraine relatively well so far, but risks remain elevated. The Financial System Assessment Program (FSAP) solvency stress tests show that the significant institutions and less significant institutions are overall resilient to an adverse scenario. The main risks to financial stability relate to a global resurgence of coronavirus disease 2019 with extended supply chain disruptions, a scarcity of gas and oil, and de-anchoring of inflation expectations in the United States and advanced Europe. Consistent with the authorities’ findings, the FSAP found small vulnerabilities from climate transition risks to the banking system. Macroprudential policy is being tightened but rising cyclical vulnerabilities will require additional action. Good progress had been made in strengthening the microprudential frameworks for banking and insurance since the 2016 FSAP. The system of Deposit Guarantee Schemes/Institutional Protection Schemes needs reform, which should be informed by a review of the distortions resulting from depositors’ high level of protection guaranteed under the current regime.
July 19, 2022
Somalia: Second and Third Reviews Under the Extended Credit Facility Arrangement and Request for Modification of Performance Criterion, Modification of Performance Criteria, Interim Assistance and Rephasing of Access and Extension of the Arrangement-Press Release; Staff Report; and Statement by the Executive Director for Somalia
Description: This paper presents Somalia’s Second and Third Reviews under the Extended Credit Facility Arrangement, Request for Waiver of Nonobservance of a Performance Criterion, Modification of Performance Criteria, Interim Assistance, and Rephasing of Access and Extension of the Arrangement. The Somali authorities have preserved macroeconomic stability and maintained the reform momentum, notwithstanding multiple shocks. The authorities have affirmed their commitment to the objectives and policies underpinning the program supported by the Extended Credit Facility and the heavily indebted poor countries process. The authorities will continue strengthening domestic revenue mobilization, including customs modernization and increasing revenue collection from the telecom sector. Key reforms on public financial management (PFM) include issuance of the PFM regulations and payroll integration. The authorities are also working toward harmonizing the legal framework for the extractive industries. Notwithstanding the multiple challenges, the authorities have met most of the conditionality established at the first review. Since then, they have also taken steps to preserve macroeconomic stability and continued to implement policies in line with the objectives of the program, in close collaboration with IMF.
July 19, 2022
Kenya: Third Reviews Under the Extended Arrangement Under the Extended Fund Facility and Under the Arrangement Under the Extended Credit Facility, and Requests for Modification of Quantitative Performance Criteria, and Waiver of Applicability for Performance Criteria-Press Release; Staff Report; Staff Statement; and Statements by the Executive Director and by Staff Representative for Kenya
Description: This paper highlights Kenya’s Third Reviews under the Extended Arrangement under the Extended Fund Facility and under the Arrangement under the Extended Credit Facility, Requests for Modification of Quantitative Performance Criteria, and Waiver of Applicability for Performance Criteria. A strong recovery is underway, although global shocks due to spillovers from the war in Ukraine are creating new spending needs and adding to inflation pressures through rising global fuel, fertilizer, and food prices. Kenya’s program is delivering resilience by helping the country navigate these global shocks while still meeting the authorities’ targets and continuing to make progress in addressing debt vulnerabilities. Strong fiscal performance is providing a welcome resilience. Although the authorities are adjusting domestic fuel prices to international levels more gradually, program targets are still being met thanks to strong tax revenues. Maintaining the momentum in the authorities’ structural reform agenda is critical. Building on the ongoing efforts to improve the oversight of state-owned enterprises, it is essential to advance the restructuring of Kenya Airways and restore the long-term viability of Kenya Power and Lighting Company.
July 19, 2022
Niger: First 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 Niger
Description: This paper presents Niger’s First Review under the Extended Credit Facility Arrangement and Request for Modification of Performance Criteria. The unfolding acute food crisis and the deteriorating security situation in the Sahel region have increased fiscal pressures. The war in Ukraine is exacerbating these challenges. The near- and medium-term economic outlook for Niger is broadly favorable with growth projected to bounce back this year and accelerate thereafter with the start of oil exports through the new pipeline. A temporary deviation from fiscal targets over 2022–23 is therefore appropriate. Stepped-up efforts to improve domestic revenue mobilization and enhance spending quality will be key. A temporary deviation from fiscal targets over 2022–23 is warranted to accommodate urgent spending needs related to the food crisis and lower budget-support grants from donors. Rising financial sector vulnerabilities, including those related to deteriorating asset quality, particularly in the microfinance sector, will need to be carefully monitored. Further efforts to foster financial inclusion are also needed. Program performance has been broadly satisfactory with all quantitative performance criteria and indicative targets at end-December 2021 met. The implementation of the structural reform agenda is advancing well.
July 18, 2022
Republic of Congo: First Review under the Three-year Extended Credit Facility Arrangement, Requests for Modification of Performance Criteria, and Financing Assurances Review-Press Release; Staff Report; and Statement by the Executive Director for the Republic of Congo
Description: This paper presents Republic of Congo’s First Review under the Three-Year Extended Credit Facility (ECF) Arrangement, Requests for Modification of Performance Criteria, and Financing Assurances Review. Economic recovery is gaining momentum but remains fragile against the backdrop of the coronavirus disease 2019 pandemic and global consequences of the war in Ukraine. More vigorous economic activity is being held back by rising inflation, as global food and oil prices surge. Maintaining momentum in structural reforms and improving governance and transparency will be critical to attaining higher, more resilient, and inclusive growth. Key among these are reforms in public financial management, anti-corruption measures, and energy sector reforms. Fiscal policy will need to maintain the delicate balance between supporting a robust economic recovery while safeguarding debt sustainability. Part of the oil revenue windfalls should finance increased social assistance and tax deferrals initiated during the pandemic to help vulnerable businesses and households cope with high inflation. Policies under this ECF-supported program will continue to help reduce fragilities and place the Republic of Congo onto a path of higher, more resilient, and inclusive growth. It will also contribute to the regional effort to preserve external stability for the Central African Economic and Monetary Union.