IMF国际货币组织全球-Nicaragua_2019-Article-IV-Consultation_86页_1mb

2019 Article IV Consultation with Nicaragua Summary

Core Content

The 2019 Article IV consultation with Nicaragua, conducted by the IMF, assessed the country's economic performance and policy response following a period of social unrest and its aftermath. The consultation concluded on February 21, 2020, and the key documents included a Press Release, Staff Report, Debt Sustainability Analysis, and a Statement by the Executive Director.

Main Economic Developments

• Social Unrest: In April 2018, social protests over pension reforms led to violence and a loss of confidence, resulting in large capital and bank deposit outflows.
• Economic Contraction: Real GDP contracted by 3.8% in 2018 and 5.7% in 2019 due to reduced aggregate demand, fiscal consolidation, and sanctions.
• Inflation: Inflation increased to 6.1% by end-2019 (from 3.9% in 2018) due to tax measures aimed at offsetting revenue losses.
• Current Account Surplus: Despite the contraction, the current account turned into a surplus in 2018 and 2019, but this was offset by a significant reversal in the financial account.
• Reserves and Capital Flows: International reserves decreased by US$512 million in 2018 and are projected to decrease by US$9 million in 2019, placing them at 4.9 months of non-maquila imports, below the recommended range.

Key Policy Recommendations

Fiscal Policy

• Maintain a conservative fiscal stance to ensure macroeconomic stability.
• Rebalance public expenditures to support social safety nets and efficient public investment.
• Address medium-term fiscal challenges and implement structural reforms with broad public support.

Monetary and Financial Sector

• Strengthen the external position to support the crawling peg exchange regime.
• Improve the regulatory and supervisory framework for loan-loss provisioning.
• Enhance the AML/CFT framework to reduce pressures on correspondent banking relationships.

Competitiveness and Governance

• Establish a broad-based anti-corruption policy to improve efficiency and reduce corruption.
• Strengthen property rights and investor protection.
• Improve the resolution of insolvency to enhance competitiveness.

Statistics and Capacity Development

• Improve the quality and timeliness of economic data with continued technical assistance from the IMF.

Executive Board Assessment

• The Executive Board agreed with the staff's appraisal and acknowledged the authorities' efforts to contain the impact of fiscal and financial shocks.
• They emphasized the need to preserve macroeconomic and financial stability and restore confidence.
• Continued support from development partners and the Fund is important.
• The 2020 budget is considered adequate to support economic recovery, but fiscal transparency and governance reforms are needed.

Fiscal Position

• The Non-Financial Public Sector (NFPS) deficit widened to 4.1% of GDP in 2018 but improved to 2% of GDP in 2019.
• The government implemented a fiscal package of tax and pension reforms in early 2019, which are projected to yield about 4.2% of GDP.
• The Central Government transferred 1.2% of GDP to INSS in 2018 and an estimated 0.7% in 2019 to address pension system challenges.

Financial Sector Developments

• The financial sector was stabilized through measures like reducing reserve requirements, introducing repos, and phasing in regulatory provisioning.
• The crawling peg exchange regime was adjusted in 2019 with a reduction in the rate of crawl from 5% to 3% to signal a commitment to low inflation.
• The financial sector faced vulnerabilities due to the economic downturn and loan recalls, but no bank failures were reported in 2018 and to date.

Key Vulnerabilities

• Fiscal Governance: Weak fiscal governance and lack of transparency create challenges in assessing fiscal risks.
• Financial Sector: High levels of distressed assets and reduced profitability remain concerns.
• External Position: The external position is assessed as moderately weaker than levels consistent with fundamentals, with a moderate REER overvaluation of 7.4% and a negative net international investment position.

Conclusion

The IMF highlighted the importance of continued structural reforms, improved fiscal transparency, and enhanced financial sector resilience to support long-term economic recovery and stability in Nicaragua.