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International Monetary Fund. European Dept.
While geopolitical tensions with Russia had already curtailed Ukraine’s access to markets, the escalation to an invasion of Ukraine by Russia and full-blown war on February 24 has dramatically altered Ukraine’s outlook. A deep recession and large reconstruction costs are to be expected, on the backdrop of a humanitarian crisis. With the war ongoing, the situation remains extremely fluid, and any forecast is at this stage subject to massive uncertainty. The authorities are rightly focusing on ensuring the continuity of critical government operations, preserving financial stability and protecting priority spending.
International Monetary Fund. European Dept.
This paper highlights the Republic of North Macedonia’s Request for Purchase Under the Rapid Financing Instrument (RFI). North Macedonia’s economic outlook has deteriorated substantially due to the coronavirus disease 2019 (COVID-19) pandemic. Real GDP is expected to decline by 4 percent in 2020 due to a fall in both domestic and external demand. This, together with negative shocks to confidence and spill-overs from global financial channels, has created an urgent balance of payments need. The authorities quickly responded with targeted and temporary fiscal policy support to limit the social and economic impact of the health emergency by protecting the liquidity of companies, preserving jobs and providing social care for the jobless and vulnerable households. The authorities have also expressed their strong commitment, once the COVID-19 crisis is over, to rebuilding fiscal buffers and implementing the structural reform agenda to help preserve debt sustainability and speed up income convergence to European Union countries.
International Monetary Fund. European Dept.
This Selected Issues paper explores how intersectoral vulnerabilities and risks have shifted over 2001–17, and especially after the Global Financial Crisis. It analyzes financial positions at the sectoral levels deposit taking institutions and non-financial corporations, households, the public sector, and the Croatian National Bank by disaggregating them into instruments, currencies, and maturities. The paper has employed balance sheet analysis (BSA) to gauge cross-sectional exposures and risks. The BSA approach is a method to study an economy as a system of interlinked sectoral balance sheets. The policies to reduce the remaining vulnerabilities have also been discussed in the paper. Standard macroeconomic indicators demonstrate that Croatia’s overall external vulnerabilities have declined since 2010. However, the balance sheet matrix shows little improvement in reduction of important cross-sectoral dependencies and liabilities to the rest of the world over 2010–17. One of the recommendations made is to encourage deleveraging through specific policy options and strategies.
International Monetary Fund. Monetary and Capital Markets Department
The Armenian banking sector is recovering from the 2014 economic slowdown, aided by additional capital injected by shareholders, several mergers, and improved regulation and supervision. However, banks, including the largest ones, are vulnerable to external shocks because high levels of dollarization expose them to FX-related credit and liquidity risks. These risks can be mitigated with the adoption of a stressed debt service to income ratio limit, the gradual introduction of reserve requirements in foreign currency for liabilities denominated in foreign currency, and the adoption of the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) in domestic currency and in United States dollars (USD). The introduction of the capital surcharge for domestic systemically important banks is also needed.
International Monetary Fund
This 2012 Article IV Consultation discusses that the economy of Poland fared well throughout the crisis. The growth was robust and well balanced in 2011. The banking sector remained profitable and well capitalized. Declining provisioning boosted profitability and the average capital adequacy ratio remained high at about 13 percent. Executive Directors have commended the authorities for sound macroeconomic management, which has underpinned the good performance of the Polish economy in a challenging environment. Directors have broadly supported the ongoing fiscal adjustment, which is necessary to rebuild fiscal buffers.
International Monetary Fund
This paper discusses Armenia’s request for a Stand-By Arrangement (SBA) with exceptional access of 400 percent of quota. Given the urgency of the situation, the request is being considered under the Emergency Financing Mechanism. The new program aims to achieve the necessary external adjustment, restore confidence in the domestic currency and the banking sector, and protect the poor. The authorities have also committed to a set of policies in the exchange rate, monetary and financial, and fiscal areas as well as on maintaining its ongoing structural reform program.
International Monetary Fund
Belarus’ economic growth has been impressive in the last few years. Belarus’ economic program is designed to facilitate adjustment to external shocks and reduce vulnerabilities. It includes a number of structural reforms on issues that are critical to the mitigation of vulnerabilities. On structural policies, the program places economic liberalization as a priority, particularly price liberalization. The program also envisages efforts to enhance the role of the private sector by reducing the distortion of taxes and the regulatory burden on private companies, and continuing privatization efforts.