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International Monetary Fund. Strategy, Policy, &, Review Department, International Monetary Fund. Finance Dept., and International Monetary Fund. Legal Dept.
This paper proposes safeguards broadly aligned with the GRA exceptional access policy that will apply in cases where combined GRA and PRGT credit exposure exceeds the GRA thresholds. The new safeguards would help to mitigate financial risks to the PRGT and the GRA, respectively, that arise from a member having high levels of combined credit from these two sources of funding. The proposed policy builds on the current policies on safeguards to Fund resources (both the Fund’s resources in the GRA and under the PRGT as Trustee, respectively).
Iulia Ruxandra Teodoru
Limited access to finance and its high cost have contributed to relatively low levels of private investment and subpar growth in the Kyrgyz Republic. Interest rate spreads have moderated in recent years, but remain high from both a regional and global perspective. At the same time, collateral requirements applied by banks are onerous and also constrain the quantity of credit supplied. This paper identifies a range of factors that could lower spreads in the Kyrgyz Republic: more competition, higher capital, lower credit risk, larger loan size, lower deposit rates and external funding costs, as well as a stronger legal framework. Lower operating costs appear critical to reduce relatively higher spreads for small and medium-sized banks. At the same time, a stronger legal framework and greater transparency on borrowers’ creditworthiness would help reduce the high collateral requirements. Reforms in all these areas would support greater financial inclusion in the aftermath of the pandemic, and could thus be a key source of sustainable and inclusive growth in the Kyrgyz Republic.
International Monetary Fund. Middle East and Central Asia Dept.
This paper discusses Republic of Armenia’s Second Review Under the Stand-By Arrangement, Requests for Augmentation of Access, Modification of Performance Criteria, and Monetary Policy Consultation Clause. Following a strong performance in 2019, the Armenian economy was hit hard by the coronavirus disease 2019 pandemic. The government has proactively responded to the crisis, adopting widespread containment measures while supporting vulnerable individuals and firms in the most affected sectors. The fiscal deficit is projected to widen considerably in 2020, reflecting the impact of the cycle on revenues and higher current spending for healthcare and economic support to vulnerable households and firms. The authorities are committed to pursuing their medium-term goal of debt sustainability once the crisis abates, and public debt is expected to decline over the medium-term in line with Armenia’s fiscal rule, while maintaining space for investment and social spending. The augmentation of access under the Stand-by Arrangement will provide much needed support, allowing the authorities to mitigate the pandemic and support affected households and businesses.
International Monetary Fund. Middle East and Central Asia Dept.
This paper highlights Republic of Armenia’s First Review Under the Stand-By-Arrangement. Armenia’s economic performance is strong with healthy growth, low inflation, a stable financial system, with increasing foreign reserves and higher revenues. Despite fiscal overperformance, it is key to maintain the reform momentum to strengthen revenue mobilization, including by completing reforms to property taxation. Implementation of the authorities’ reform agenda including efforts to improve governance by establishing a holistic anti-corruption framework, will bolster sustainable and inclusive growth. The monetary policy framework’s focus on price stability has served Armenia well. The authorities’ implementation of Basel III measures will raise the resilience of the financial system, while their plans to develop the capital market and improve access to finance are also welcome.
Ms. Li Liu, Mr. Ben Lockwood, Miguel Almunia, and Eddy H.F. Tam
Using administrative tax records for UK businesses, we document both bunching in annual turnover below the VAT registration threshold and persistent voluntary registration by almost half of the firms below the threshold. We develop a conceptual framework that can simultaneously explain these two apparently conflicting facts. The framework also predicts that higher intermediate input shares, lower product-market competition and a lower share of business to consumer (B2C) sales lead to voluntary registration. The predictions are exactly the opposite for bunching. We test the theory using linked VAT and corporation tax records from 2004-2014, finding empirical support for these predictions.