International Monetary Fund. Western Hemisphere Dept.
INTERNATIONAL MONETARY FUND
Continued low energy prices and three years of recession have significantly widened fiscal deficits. Absent consolidation, fiscal balances and public debt are projected to be on an unsustainable medium-term trajectory. The external balance assessment indicates the currency remains overvalued. Together with low prices and weak output in the energy sector, this has considerably widened the current account deficit. These large current account deficits have been financed by official borrowing, private capital inflows, and some reserve losses, thus starting to rapidly erode a large positive foreign asset position. That said, reserve losses have been limited by the rationing of foreign exchange, which, however, has led to persistent and highly distortionary shortages in the foreign exchange (f/x) market. Monetary policy has been on hold on concerns that lower interest rates would exacerbate pressures in the foreign exchange (f/x) market, where shortages are already widespread.