Country Reports
2022
July 25, 2022
Benin: 2022 Article IV Consultation and Requests for an Extended Arrangement under the Extended Fund Facility and an Arrangement under the Extended Credit Facility-Press Release; Staff Report; Staff Statement; and Statement by the Executive Director for Benin
Description: This paper presents Benin’s 2022 Article IV Consultation and Requests for an Extended Arrangement under the Extended Fund Facility (EFF) and an Arrangement under the Extended Credit Facility (ECF). Revenue mobilization—the cornerstone of the authorities’ reform agenda—will, together with better spending prioritization and improved efficiency, help create the much-needed fiscal space to support Benin’s significant development and security needs while preserving debt sustainability. A steadfast implementation of the recently adopted action plan for Anti Money Laundering/Combating the Financing of Terrorism and further strengthening the rule of law and governance will consolidate the foundations of sustained private sector-led growth that benefits all Beninese. Considering Benin’s relatively large level of income inequality, the authorities’ IMF-supported EFF/ECF is rightly focused on development with a human face through enhanced access to basic public services and improved state presence in vulnerable areas, consistent with the authorities “civilian approach” to mitigating security risks. Ongoing efforts to enhance resilience to climate change are also important. Achieving these ambitious goals will require continued commitment to clearly communicated reforms and strong technical and financial support from Benin’s development partners to complement large and front-loaded IMF support.
July 25, 2022
Benin: Selected Issues
Description: This Selected Issues paper on Benin focuses on scaling up public expenditure for inclusive growth. Poverty and inequality remain relatively high in Benin despite robust economic growth over the past decade, partly reflecting the fact that public spending on education, health and social protection has not kept up with demographic trends. Achieving the Sustainable Development Goals will require significant increases in public spending going forward. Underspending on public health sector reflects low budget appropriations and weak implementation of capital expenditure. School enrollment rates have overall improved, with significant variations across education levels. Benchmarking and frontier analyses, respectively, suggest that there is scope to increase the level of spending on education and its efficiency. At the sectoral level, many measures could be considered to improve the inclusiveness of the government intervention. Scaling up public spending, while preserving fiscal sustainability, is needed to address large social and infrastructure gaps.
July 22, 2022
United Arab Emirates: Technical Assistance Report - Liquidity Management and Forecasting
Description: This paper presents United Arab Emirates’ (UAE) Technical Assistance report on liquidity management and forecasting. The new Dirham Monetary Framework is largely consistent with an operational framework under a fixed exchange rate regime and capital mobility. The foreign exchange swap facility should be discontinued once the eligible collateral for the Overnight Lending Facility is broadened to include US dollars. Some improvements can be introduced to the structural open market operations (OMO). The Central Bank of the UAE (CBUAE) fine-tuning OMOs should be implemented to manage unexpected liquidity fluctuations during the Reserve Maintenance Period. Reserve requirements in the UAE are mainly a tool for monetary policy and liquidity management purposes but their nonremuneration is acting as an indirect tax on financial intermediation. The CBUAE should implement the designed state-of-the-art, full-fledged forecasting framework for each of the three main autonomous factors, as well as a reconciliation strategy to forecast the sum of the autonomous factors with an estimation of the confidence interval. The new liquidity forecasting framework provides several important features for liquidity management.
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
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
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.