Country Reports
2018
June 11, 2018
Angola: 2018 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Angola
Description: This 2018 Article IV Consultation highlights that lower oil prices since mid-2014 have placed the Angolan economy under stress. The authorities initially reacted to the oil price shock with significant fiscal tightening and exchange rate adjustments coupled with foreign exchange quantitative restrictions. The policy mix in the run-up to the August 2017 elections—fiscal expansion and pegged exchange rate—led to a further erosion of fiscal and external buffers. President João Lourenço has focused attention on improving governance and restoring macroeconomic stability. The government’s macroeconomic stabilization program envisages: upfront fiscal consolidation; greater exchange rate flexibility; reducing the public debt-to-GDP ratio to 60 percent over the medium term; improving the public debt profile; and settling domestic payments arrears.
June 11, 2018
Rwanda: Ninth Review Under the Policy Support Instrument
Description: This paper discusses Rwanda’s Ninth Review Under the Policy Support Instrument (PSI). Growth in 2017 was better than expected, supported in all areas except construction. Particularly notable was export performance, with goods exports rising by 58 percent, based on strong performance of both traditional and nontraditional exports. Inflation has remained below the central bank’s 5 percent medium term target. External balances and reserve buffers have continued to improve faster than expected. Program performance is on track, with all continuous and end-December 2017 quantitative targets met as were all structural benchmarks, except the indicative target on contracting of new external debt by public enterprises. The IMF staff supports the completion of the Ninth Review under the PSI-supported program.
June 8, 2018
Angola: Selected Issues
Description: This Selected Issues paper examines tradeoffs and opportunities for oil revenues in Angola. Angola is facing a stark trade-off between declining oil fiscal revenues over the medium term and increasing social and public investment needs. Opportunities do exist to make the most of Angola’s remaining oil reserves, whilst reducing its debt burden and building fiscal buffers. However, a sound fiscal framework for the use of oil revenues that includes a well-designed fiscal stabilization fund may be needed. Under a more active fiscal rule, public investment can be scaled up gradually, while building fiscal buffers and insulating the non-oil economy from volatile oil price movements.
June 8, 2018
Romania: Financial Sector Assessment Program
Description: This paper assesses the stability of the Romania’s financial system. Romania’s financial sector has strengthened significantly over the last few years. Effective supervisory measures have helped reduce the high level of nonperforming loans from 21.9 percent at its peak in 2013 to 6.4 percent as of December 2017. Foreign-owned banks’ dependence on parent funding has significantly declined, while deposits from the domestic private sector have increased, reducing liquidity risks. Banks’ capital buffers strengthened, on the back of a slowdown of credit and low interest rates, with an average capital to risk-weighted assets now above 18 percent. However, some vulnerabilities are emerging, and policy action is needed to address these risks and strengthen financial stability.
June 8, 2018
Romania: Financial Sector Assessment Program-Technical Note on Calibration of a Debt-Service-to-Income Limit in Romania-Evidence from Microdata
Description: This Technical Note discusses calibration of a debt-service-to-income (DSTI) limit in Romania. The recent pick-up in household credit in Romania has given rise to a need for revisiting the design of existing macroprudential tools addressing household vulnerabilities. The National Bank of Romania is considering a redesign of its existing macroprudential tool related to household indebtedness, including expanding its scope to cover all household loans. The analysis of loan-level data from the Central Credit Register suggests that the probability of default of a borrower is highly sensitive to any changes in DSTI at DSTI ratios at about 50 percent, particularly for mortgage loans. It is recommended to set the limit such that loans do not exceed this sensitivity threshold.
June 8, 2018
Romania: Financial Sector Assessment Program-Technical Note-Balance Sheet Analysis
Description: This Technical Note analyzes the macro-financial interlinkages, sectoral dependencies, and potential balance sheet vulnerabilities for all resident sectors in Romania. The financial sector size and interconnectedness have been increasing significantly. The overall amount of intra-financial sector exposures grew from five percent of GDP in 2008 to approximately seven percent of GDP in 2016. The banking system is at the center of intra-financial sector balance sheet connections, as an overall net borrower that channels funds to other domestic sectors. The funding of bank liabilities by domestic financial institutions has been rising and stood at close to 10 percent of banks’ nonequity liabilities in 2016. Moreover, banks are also exposed on the credit side to nonbank financial institutions, in particular to other financial institutions.
June 8, 2018
Romania: Financial Sector Assessment Program-Technical Note-Systemic Risk Analysis and Stress Testing the Financial Sector
Description: This Technical Note discusses the results of systemic risk analysis and stress testing of Romania’s financial sector. Although the Romanian banking sector has a strong initial capital position, banks are affected significantly by the realization of the shocks captured by the scenarios. The stress test results indicate that an extreme but plausible adverse scenario would have a significant negative impact on the capital ratios of the banking system. Although the banking sector as a whole maintains capital ratios above the minimum regulatory requirements, several (smaller) banks prove vulnerable. The extreme adverse scenario reflects downside external risks as well as a domestic demand shock impacting private consumption and investment.
June 8, 2018
Romania: Financial Sector Assessment Program-Technical Note-Macroprudential Policy Framework and Tools
Description: This Technical Note analyzes the implementation of macroprudential policy framework and tools in Romania. The National Bank of Romania (NBR) has a long experience in implementing macroprudential policy measures. The NBR monitors several indicators to assess the build-up of systemic risk, many of which are derived from the nation-wide credit register and related data sources. The institutional framework for macroprudential policymaking has recently been revised and contains a clear mandate and well-defined objectives, but NBR’s role seems constrained. It is recommended that the macroprudential policy toolkit should be strengthened further to address risks identified in the Financial Sector Assessment Program’s risk analysis. The systemic risk buffer should be calibrated carefully to address risks stemming from the strong sovereign-bank nexus.
June 8, 2018
Romania: Financial Sector Assessment Program-Technical Note-Crisis Preparedness and Safety Net
Description: This Technical Note assesses the state of crisis preparedness and safety net in Romania. The bank resolution and crisis management toolkit has been significantly revamped since the last Financial Sector Assessment Program. The implementation of the Bank Resolution and Recovery Directive in Romania enhanced the National Bank of Romania’s (NBR) powers to deal with failing banks, while the Bank Deposit Guarantee Fund gained greater involvement in these processes. The NBR has been charged with new responsibilities that flow from its ongoing role as supervisory and resolution authority, namely the enforcement and analysis of recovery planning requirements and the preparation of resolution plans. Some elements needed for the effectiveness to the crisis management framework are still work-in-progress.
June 8, 2018
Guatemala: 2018 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Guatemala
Description: This 2018 Article IV Consultation highlights that a sound monetary policy management in Guatemala has helped keep inflation expectations firmly anchored. Fiscal deficits have remained at decade lows on the back of low debt tolerance and inadequate budgetary execution. Terms of trade gains and an upsurge in remittances inflows moved the current account into a sizable surplus. The financial system is sound and well-regulated while vulnerabilities seem manageable. Growth performance nevertheless falls shorts of the rates needed to achieve Guatemala’s aspirations to meaningfully lift the living standards of its citizens. Near-term growth prospects remain subdued, at 3.2 percent in 2018 and 3.6 percent in 2019.