Country Reports
2022
November 17, 2022
St. Vincent and the Grenadines: 2022 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for St. Vincent and the Grenadines
Description: St. Vincent and the Grenadines is recovering from the pandemic and 2021 volcanic eruptions. Despite the authorities’ strong efforts to contain deficits, critical fiscal responses to these shocks pushed up public debt, which—while assessed as sustainable—remains at high risk of distress should future shocks materialize. The economy is projected to grow by 5 percent in 2022, supported by large-scale investment projects and recoveries in tourism and agriculture. Surging commodity prices, fueled by Russia’s war in Ukraine, are expected to raise inflation sharply to 5.8 percent in 2022, adding to fiscal and external pressures and weighing on the recovery. So far, the financial system has weathered the shocks relatively well. The outlook is subject to significant downside risks primarily from an abrupt slowdown in trading partners’ growth, potential delays in investment projects including due to supply chain disruptions, and the ever-present threat of frequent natural disasters.
November 17, 2022
Mexico: Review Under the Flexible Credit Line Arrangement-Press Release; and Staff Report
Description: Mexico has recovered more gradually from the pandemic than its peers and economic activity is expected to slow in the second half of this year and into 2023. Inflation increased as the economy emerged from the COVID-19 shock but is expected to plateau in the second half of 2022 and then gradually decline.
November 16, 2022
Republic of Madagascar: Technical Assistance Report-Climate Macroeconomic Assessment Program
Description: Madagascar is exposed to a multitude of climate hazards such as tropical cyclones, droughts, and floods, which cause significant damage to key sectors, thereby undermining development efforts. Madagascar continues to develop strategies and policies for addressing climate change, including commitments under the Nationally Determined Contribution, natural disaster risk management, adaptation measures, and ongoing public financial management and public investment management reforms. Resilience to climate shocks and natural disasters can only be achieved through a combination of climate measures, public investment efficiency measures and public investments in both human capital and resilient infrastructure.
November 15, 2022
Oman: 2022 Article IV Consultation-Press Release; and Staff Report
Description: Strong policy actions helped mitigate the fallout from the COVID-19 pandemic, and the economic recovery is gaining traction, supported by revival in the hydrocarbon sector and the relaxation of social restrictions. CPI inflation has been contained thus far, partly reflecting administered prices and caps on selected fuel prices. Fiscal and external buffers have increased, supported by higher hydrocarbon revenues and substantial fiscal adjustment under the authorities’ Medium-Term Fiscal Plan (MTFP). The authorities remain committed to fiscal consolidation notwithstanding oil revenue windfalls and social pressures. Financial soundness indicators appear healthy, benefiting from the strong buffers before entering the crisis and prudent central bank oversight. A broad range of structural reforms are being implemented under Oman Vision 2040. However, downside risks, notably from global sources, dominate in the short run.
November 14, 2022
Costa Rica: Third Review Under the Extended Arrangement Under the Extended Fund Facility, Request for an Arrangement Under the Resilience and Sustainability Facility, Request for Waiver of Nonobservance of Performance Criterion, and Monetary Policy Consultation
Description: The new administration, which came into office in May 2022, has had to confront the aftermath of a cyberattack on several government systems as well as the impact of the commodity price shock, slowing trading partner growth, and tightening financial conditions. After a strong rebound in 2021, these global headwinds are weighing on activity. Meanwhile, as elsewhere, inflationary pressures are elevated.
November 10, 2022
Mexico: Financial Sector Assessment Program-Technical Note on Cyber Resilience and Financial Stability
Description: Mexico’s financial system is digitalizing rapidly, increasing exposure to cyber risk. As in other jurisdictions, internet and mobile banking users in Mexico have increased substantially, but cyber incidents have also surged in recent years. The tight interdependencies within its financial system, and beyond, make Mexico vulnerable to evolving cyber threats. Thus, the Financial System Stability Council (CESF) has recognized cyber as a risk with potential to impact financial stability.
November 10, 2022
Mexico: Financial Sector Assessment Program-Technical Note on Selected Issues in Financial Safety Net Arrangements and Financial Crisis Preparedness
Description: The Mexican financial authorities strengthened the financial safety net since the last FSAP and need to continue and accelerate enhancements. Recovery and resolution plans are in place for all commercial banks, systemic banks are required to increase their loss absorbency complementing the critical Basel III reforms that the authorities have advanced, and the authorities progressed preparations for using the bridge bank tool, signed cooperation agreements with all major home jurisdictions of the Mexican systemic banks, clarified the emergency lending facilities including to banks in resolution, and improved the depositor payout process. Yet, accelerated enhancements are necessary, including by further improving the credibility and feasibility of banks’ financial contingency arrangements, removing impediments to banks’ resolvability and the use of the bridge bank and purchase and assumption transaction resolution tools, expanding the resolution regime’s remit to financial holding companies, and reinforcing the resolution and deposit insurance agency’s governance, autonomy, and resources.
November 10, 2022
Mexico: Financial Sector Assessment Program-Technical Note on Systemic Liquidity Management
Description: Mexican money markets are well-regulated and function efficiently, with significant mitigants to systemic liquidity risks. This is supported by the dominance of the repo market in system-wide liquidity management, the marginal level of interbank unsecured transactions, as well as commercial banks’ full compliance with the Liquidity Coverage Ratio (LCR). However, development banks are not subject to liquidity regulation. These banks have development objectives and the sovereign backstops their capitalization and explicitly guarantees all of their liabilities, however, some of them have a significant reliance on short-term funding with low levels of unencumbered high-quality liquid assets. This might contribute to systemic liquidity risk during periods of extreme market stress in severe tail risk scenarios. Thus, the authorities could consider steps to strengthen the development banks’ liquidity risk management framework by improving the monitoring of their liquidity, leveraging their internal risk committees to take stock of their risk profile and contribution to systemic risk, making use of Pillar 2 requirements, and/or devising appropriate action(s) to improve these entities’ maturity transformation.