Country Reports
2024
July 18, 2024
Germany: Selected Issues
Description: This Selected Issues paper explores options for Germany to generate additional fiscal room by reducing its public spending and increasing its revenues, while minimizing the associated costs to the economy. The resulting menu of policy options is guided by examining areas where Germany stands out in simple comparisons against other advanced economies. Germany could increase its collection of taxes on real estate. Germany could also generate revenue by closing unnecessary and distortionary loopholes in the treatment of property within income and corporate taxes. These measures and a moderate easing of the debt-brake’s limits could help generate substantial fiscal room for higher public investment and other priority spending needs, as well as for growth-enhancing tax reforms. The appropriate choices among these measures and other options will depend on public preferences across various dimensions, including distributive preferences and views about the appropriate size and role of the state. This paper presents more options than are necessary, meaning that not all of the options need to be adopted. Choices between the various options will depend on social preferences, for example on the size of the government.
July 16, 2024
Canada: 2024 Article IV Consultation-Press Release; and Staff Report
Description: The 2024 Article IV Consultation discusses that the Canadian economy appears to have achieved a soft landing: inflation has come down almost to target, while a recession has been avoided, with gross domestic product growth cushioned by surging immigration even as per capita income has shrunk. Housing unaffordability has risen to levels not seen in a generation, with demand boosted by immigration and supply facing continued challenges to expansion. Canada’s recent introduction of quantitative fiscal objectives is welcome and could be followed by adoption of a formal fiscal framework to anchor fiscal policy even more effectively. The authorities’ multipronged approach to address housing affordability is expected to yield results over time, but further efforts will likely be needed at all levels of government to address the large housing supply gap. Boosting Canada’s lagging productivity growth—including by taking steps to promote investment and R&D, harness artificial intelligence and other advanced technologies (within appropriate guardrails), and capitalize on the green transition—is a key priority for the country’s long-term prospects. Given skills gaps and demographic pressures, immigration remains a critical ingredient.
July 15, 2024
Angola: 2024 First Post-Financing Assessment-Press Release; and Staff Report
Description: This paper presents Post Financing Assessment (PFA) Consultation with Angola. Angola’s capacity to repay the IMF is adequate though subject to risks. Angola remained resilient in the face of significant challenges in 2023, including weaker oil production and prices. Spending adjustments helped contain the impact of weaker oil prices and lower production in 2023, though the gains from fiscal consolidation were lower-than-anticipated. The nonoil primary fiscal deficit (NOPFD), estimated at 4.4 percent of gross domestic product (GDP) in 2024, is expected to steadily decline in the medium term on modestly improving non-oil revenues, moderately lower current and capital expenditures, and savings from fuel subsidy reform. Continued efforts on enhancing the monetary policy framework are needed to reduce inflation and support non-oil medium-term growth. Implementing broad ranging structural reforms is vital to improve business environment and maintain growth in the context of a long-term decline of the oil sector. Addressing issues related to governance, gender, and climate change remains critical to achieving economic diversification and sustainable growth.
July 15, 2024
Democratic Republic of the Congo: 2024 Article IV Consultation, Sixth Review Under the Extended Credit Facility Arrangement, Request for a Waiver of Nonobservance of Quantitative Performance Criterion, and Financing Assurances Review-Press Release; Staff Report; and Statement by the Executive Director for Democratic Republic of the Congo
Description: This paper presents Democratic Republic of the Congo’s 2024 Article IV Consultation, Sixth Review under the Extended Credit Facility (ECF) Arrangement, Request for a Waiver of Nonobservance of Quantitative Performance Criterion, and Financing Assurances Review. The Democratic Republic of the Congo has made significant progress under the ECF arrangement, although performance during the sixth review has been constrained by the persistent security and humanitarian crises, fiscal slippage, and ongoing inflationary pressures. The domestic fiscal deficit for 2024 is projected to narrow compared to 2023, as higher mining revenue would help ease pressures from higher security spending and investment. Performance under the program has been generally positive, with most quantitative targets met and key reforms implemented, albeit at a slow pace. The economic outlook remains positive but is subject to substantial downside risks. This calls for continued prudent policies and increasing reform efforts in fiscal and monetary frameworks and in governance.
July 15, 2024
Côte d'Ivoire: Second Reviews Under Extended Arrangement Under the Extended Fund Facility and Under the Arrangement Under the Extended Credit Facility, and Request for Modification of Quantitative Performance Criteria, and the First Review Under the Resilience and Sustainability Facility Arrangement-Press Release; and Staff Report
Description: This paper discusses Côte d'Ivoire’s Second Review under Extended Arrangement under the Extended Fund Facility and under the Arrangement under the Extended Credit Facility, and Request for Modification of Quantitative Performance Criteria, and the First Review under the Resilience and Sustainability Facility Arrangement. Côte d’Ivoire’s economy remains resilient against a still difficult global backdrop. Notwithstanding lower than expected cocoa production, the medium-term outlook remains favorable and has been boosted by still strong consumption and investment demand, as well as new activity in the hydrocarbon exploration and production sector. The authorities remain firmly committed to boosting tax revenue into the medium term, and to implementing the medium-term revenue strategy (MTRS) approved in May 2024. Adoption of a comprehensive MTRS is a significant reform, which provides an overall vision for tax policy and administration reforms to ensure that domestic revenue mobilization is self-sustaining and commands broad public support. The debt management operation has been instrumental in ensuring that debt sustainability risks remain within the moderate rating of debt distress. Maintaining momentum on structural reforms under the program will be critical to support the objectives of the national development plan.
July 15, 2024
Democratic Republic of the Congo: Selected Issues
Description: This paper analyzes domestic revenue mobilization in the Democratic Republic of the Congo (DRC) and offers options to strengthen it. Domestic revenue mobilization (DRM) in the DRC has improved during the Extended Credit Facility ECF program, standing at 13.7 percent over gross domestic product (GDP) in 2023, though it remains persistently low relative to peer countries. The recent improvements in revenue mobilization have been driven by stronger corporate income taxation (particularly stemming from the extractive sector). A comparison between DRC’s and peer countries’ tax structure points to significant room for boosting domestic revenues with stronger mobilization of personal income taxes, taxes on international trade and transactions and goods and services. In addition, the country’s tax potential (estimated on the basis of its structural characteristics and a stochastic frontier model) points to significant scope for improving tax-to-GDP ratio, by about 10 percentage points under more efficient tax policy and tax collection. Finally, tax administration reforms based on recommendations from the recently published the Tax Administration Diagnostic Assessment Tool report can significantly contribute to boosting DRM, with particular focus on tax-avoidance in the mining sector.
July 15, 2024
Iceland: 2024 Article IV Consultation-Press Release; and Staff Report
Description: The 2024 Article IV Consultation with Iceland highlights that following an impressive recovery from shocks in recent years, tight monetary and fiscal policies have slowed domestic demand growth, strengthened the current account, and started to lower inflationary pressures. A coordinated tightening of macroeconomic policies has successfully narrowed domestic and external imbalances built up during the post-pandemic period. Appropriately tight macroeconomic policies are expected to dampen economic growth in the near term, while medium-term growth prospects are favorable. Reactivation of the fiscal rules in 2026 presents an opportunity to revisit their design to ensure fiscal policy is both sustainable and contributes to macroeconomic stability. An application of the IMF’s Integrated Policy Framework to Iceland suggests some benefits of foreign exchange interventions during times of stress. Structural policies should focus on gradually reducing state involvement in collective wage bargaining, accelerating the green transition, and further diversifying the economy.
July 15, 2024
Nepal: Fourth Review Under the Extended Credit Facility Arrangement-Press Release; Staff Report; and Statement by the Executive Director for Nepal
Description: This paper focuses on Nepal’s Fourth Review under the Extended Credit Facility (ECF) Arrangement. Nepal has made good progress with implementation of the program, despite a challenging political environment. With growth below potential, executing the planned increase in capital spending, as envisaged in the FY24/25 budget, while maintaining fiscal discipline through domestic revenue mobilization and rationalization of current spending remains critical to boost growth and preserve medium-term fiscal sustainability. Monetary policy should maintain the current cautious, data-driven approach to preserving price and external stability. Avoiding further boom-bust credit cycles is critical to establish a more stable, pro-growth equilibrium. Continued progress on the structural front remains needed to foster investment and more inclusive growth. These include improving the business climate, building human capital, and continuing to improve social safety nets, in particular aiming for full execution of the child grant budget, followed by an expansion of the program to all districts in Nepal.
July 15, 2024
Iceland: Selected Issues
Description: This Selected Issues paper presents a pilot study on integrated policy framework (IPF) in Iceland. The IPF helps assess the appropriate policy responses to shocks for economies vulnerable to capital flow volatility, allowing for some market frictions. Iceland is an advanced economy pilot under the IPF with some of the frictions identified under the IPF framework. The Central Bank of Iceland implements an inflation targeting regime with the possibility of currency intervention within its mandate. The foreign exchange (FX) market in Iceland is assessed to be shallower than in other advanced economies, especially around episodes of global economic and financial stress. Foreign currency assets are mainly due to portfolio allocation of the large pension sector. The authorities should explore options to deepen the foreign currency derivatives market in a manner consistent with continued foreign exchange market stability. Iceland has a history of disruptive speculative foreign currency trading, which points to the need for moving cautiously with reforms to deepening the FX derivatives market. Reforms that could be explored include reassessing the limits on commercial banks’ derivative transactions. This would encourage greater participation of foreign investors in the domestic bond market and facilitate hedging of FX risk, thereby reducing the likelihood of disruptive exchange rate movements.
July 12, 2024
France: Selected Issues
Description: This Selected Issues paper aims to deep dive on the climate transition for France. The paper discusses macroeconomic implications, fiscal policies, and financial risks. France has taken a leadership role in global mitigation initiatives. French banks should also continue to mitigate climate transition risks by integrating them into their governance, strategy, and risk management processes. Revenue could be recycled through targeted cash transfers to vulnerable households and reductions in labor and/or corporate income taxes. Sectoral policies can usefully complement carbon pricing while helping balancing fiscal, economic, equity, and acceptability objectives. Transitioning to distance-based charges can help close emissions gaps, reach the sectoral carbon budget, and maintain revenue. The transition toward a low-carbon economy and the structural changes associated with it can pose important economic and financial challenges, if not well-managed and timed. A growing number of central banks and global institutions increasingly acknowledge the financial stability implications of climate transition risk.