Selected Issues Papers
IMF Selected Issues Papers are prepared by IMF staff as background documentation for periodic consultations with member countries.
2025
April 16, 2025
Stress Testing the Albanian Banking Sector: A Decade Post-FSAP
Description: Over the past decade, the Albanian banking sector has undergone a remarkable transformation amid strong macroeconomic performance and sound financial reforms. Nevertheless, pockets of vulnerability remain, including some that were identified during the IMF’s 2014 Financial Sector Assessment Program (FSAP). To assess the resilience of the Albanian banking sector, this paper conducts capital adequacy and liquidity stress testing exercises using supervisory bank-level data. The results indicate banks’ broad resilience to shocks arising from non-performing loans and interest rates. On the other hand, vulnerabilities owing to large-borrower and sovereign exposures are found to be material in some cases. Relatedly, while banks are found to have adequate high-quality liquid assets under liquidity stress scenarios, such resilience hinges importantly on their access to the Bank of Albania’s liquidity facility. Such results call for further strengthening of the macroprudential toolkit and continued efforts to deepen financial markets.
April 16, 2025
Foreign Exchange Intervention Through the Lens of the Quantitative Integrated Policy Framework: The Case of Albania
Description: In recent years, Albania has experienced a sustained appreciation of the domestic currency. This raises the questions of what factors are driving this appreciation and how to calibrate appropriate policy responses. Drawing on insights provided by the IMF’s integrated policy framework (IPF), this paper examines the case for foreign exchange intervention (FXI) in Albania by estimating an IPF model to quantitatively illustrate relevant policy tradeoffs. While the estimation results confirm the shallow nature of the local FX markets, the appreciation of the lek is found to have been primarily driven by fundamental factors, making conventional interest rate policy an appropriate policy tool. Nevertheless, in certain circumstances where the fundamental lek appreciation is likely to be compounded by non-fundamental shocks, including shifts in foreign investor risk appetite, FXI can serve as an effective complementary tool in alleviating output-inflation tradeoffs.
April 15, 2025
Tracing the Slowdown of Labor Productivity Growth: Sweden
Description: Labor productivity in Sweden is among the highest in Europe but has been experiencing a secular decline since the GFC, similar to trends in other advanced economies. Sweden’s strong performance is supported by a skilled labor force, a competitive business environment, high R&D investments, and deep financial markets. However, evidence points to barriers to resource allocation across sectors and firms, and a multi-faceted solution is needed. Proposed reforms by the authorities’ Productivity Commission could effectively address these issues. Given the evolving structure of the Swedish economy, policies that facilitate the growth of services sector firms would be particularly beneficial.
April 15, 2025
Fostering Capital Markets and Institutional Investor Development in Oman: Oman
Description: Despite recent government-led initiatives to improve investor access and encourage participation by local businesses, capital markets in Oman remain relatively small and illiquid and the investor base remains dominated by domestic banks and pension funds. This paper reviews the experiences of other emerging markets in developing local capital markets, and describes the challenges faced in the development of such markets. The review shows establishing a functioning money and local currency bond market remains a critical first step in successful capital markets' development, while several policy tools beyond tax incentives can be employed to support participation in local markets. Increasing the presence of life insurance companies and reducing information asymmetries would help spur demand from a broader set of institutional investors.
April 15, 2025
Embracing Digitalization to Accelerate Oman's Economic Transformation: Oman
Description: Motivated by Oman’s economic transformation agenda, this paper: (i) takes stock of the state of digitalization in Oman; (ii) provides an illustration of potential gains from enhanced digitalization; and (iii) highlights policy priorities that can support the authorities endeavors in advancing their digitalization agenda. The findings suggest that while Oman has progressed well on some aspects of digitalization, it still needs to deploy additional investments and efforts to match its GCC peers on several other aspects and accelerate its economic transformation.
April 15, 2025
Labor Market Dynamics in Oman: Oman
Description: The prevalent strong preference for public sector employment among young Omanis, coupled with demographic pressures and medium-term fiscal sustainability objectives amid economic diversification away from hydrocarbons, underscores the urgency to pivot towards a more dynamic private sector that attracts Omanis towards private sector jobs. This note delves into recent developments and structural idiosyncrasies in Oman's labor market, highlighting distinct segmentation and limited mobility, which disincentivized upskilling and impeded sectoral labor reallocation. The analysis reveals that comprehensive reforms are needed to narrow the public-private wage gap, boost private sector employment for nationals, and elevate overall productivity. These include aligning wages with productivity, improving vocational training, fostering female labor market participation, and enhancing labor market mobility for expatriate workers. Implementing these measures is pivotal for Oman to realize its Vision 2040 objectives, transitioning towards a knowledge-based economy, and achieving sustainable nonhydrocarbon growth.
April 15, 2025
Fostering Entrepreneurship and SMEs to Support Economic Diversification in Oman: Oman
Description: The transition to a vibrant economy under Oman Vision 2040 and the urgency to develop a more dynamic private sector that can absorb the entry of a young and educated labor force both stress the need to empower SMEs, which play a large role in supporting job creation and nonhydrocarbon activity in Oman. This note takes stock of the role of small and medium-sized enterprises (SMEs) in Oman, identifies past and current bottlenecks that hinder entrepreneurial dynamism, and documents recent reforms aimed at lowering the costs associated with doing business, facilitating access to finance, and enhancing the integration of SMEs into value chains. The analysis suggests that policies complementing existing initiatives, through a private sector driven credit guarantee scheme, by adapting insolvency frameworks tailored to SMEs, and supporting linkages between SMEs and multinational enterprises in Special Economic Zones (SEZs), could help maximize long-term gains to SMEs and the broader economy.
April 11, 2025
Assessing Climate Change Risks: Potential Output Losses and Gains from Strengthening Resilience, Bahamas
Description: The Bahamas is highly vulnerable to the effects of climate change, including gradual sea level rise, biodiversity loss, and intensifying hurricanes. Together, these challenges threaten to undermine the country’s potential output over the long term by inflicting damages to physical assets and eroding natural capital, which is vital to its tourism-driven economy. Importantly, these risks are unevenly distributed with smaller islands being more exposed and sensitive than the larger, more developed ones. Addressing these disparities as well as closing economy-wide adaptation needs through investments in structural resilience can unlock large potential output gains.
April 11, 2025
Housing Affordability in The Bahamas: Bahamas
Description: Though the population in The Bahamas has expanded swiftly since 2010, the stock and affordability of new housing has not kept pace due to limited wage growth and financing constraints. This chapter takes stock of recent trends in the residential housing market in The Bahamas and discusses the potential drivers of reduced housing affordability. The authorities have taken various initiatives (guaranteed loan programs, construction of public rental units) to alleviate housing shortages. However, there is room for additional public spending in housing. Easing access to credit for residents would also support increased homeownership.
April 11, 2025
Determinants of Sovereign Spreads in The Bahamas: Bahamas
Description: To analyze Bahamian sovereign spreads, a fundamentals-based model is estimated using data on emerging market economies. The main findings are: first, while both domestic and global covariates are important determinants of spreads, a sizeable effect comes from the interaction of global risk aversion and a country’s risk rating. Second, inclusion in the EMBIG index (Emerging Market Bond Index Global) is a significant driver for emerging markets. The spreads in The Bahamas would have compressed by 56 basis points compared to other countries with similar fundamentals if the archipelago were included in this index.