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Business and Economics > Banks and Banking

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Cover IMF Staff Country Reports
Kuwait: Selected Issues
International Monetary Fund. Middle East and Central Asia Dept.
This Selected Issues paper empirically investigates the banking sector and macroeconomic spillovers to Kuwait from US monetary policy tightening. It finds that pass-through from the US policy rate to lending and deposit rates in Kuwait is high in the short run, and complete in the long run. It also finds that the impact of US monetary policy tightening on the Kuwaiti economy depends on the level of oil prices relative to their fiscal breakeven. The estimation results suggest that the negative impact of US monetary policy tightening on non-oil gross domestic product growth depends on the level of oil prices. The overall growth impact of US monetary policy tightening is found to be larger and more persistent when oil prices are below their fiscal breakeven level. This paper finds that spillovers from US monetary policy tightening to the Kuwaiti economy depend on oil prices. It shows that market interest rates in Kuwait comove strongly with the US policy rate.
Keywords:
oil GDP growth; tightening cycle; monetary policy spillover; bank interest interest rate; projection regressions--impact; Oil prices; Fiscal governance; Monetary tightening; Global
Cover IMF Staff Country Reports
Islamic Republic of Mauritania: 2022 Article IV Consultation and Request for 42-Month Arrangements under the Extended Credit Facility and the Extended Fund Facility-Press Release; Staff Report; and Statement by the Executive Director for the Islamic Republic of Mauritania
International Monetary Fund. Middle East and Central Asia Dept.
Volatile commodity prices and a tightly managed exchange rate (ER) have led to boom and bust cycles with significant impacts on the public and financial sectors. While the previous Extended Credit Facility (ECF) arrangement (December 2017—March 2021) has helped maintain macroeconomic stability, the pandemic has delayed structural reform implementation and widened the gap to reach the Sustainable Development Goals (SDGs). In addition, surging international commodity prices since the start of Russia’s war in Ukraine have deteriorated the external and fiscal balances and led to inflationary pressures and food insecurity. In March 2021, the authorities requested a successor arrangement to support accelerated implementation of their national development strategy, help increase social and infrastructure spending, and improve governance and the business environment.
Keywords:
development effort; Medium-term policy priority; Mauritanian authorities; commodity price movement; IMF arrangement; AIV policy recommendation; Operational risk; Debt sustainability analysis; Currency markets; Global; Middle East and Central Asia; Middle East; North Africa; East Africa
Cover IMF Staff Country Reports
Islamic Republic of Mauritania: 2022 Article IV Consultation and Request for 42-Month Arrangements under the Extended Credit Facility and the Extended Fund Facility-Press Release; Staff Report; and Statement by the Executive Director for the Islamic Republic of Mauritania
International Monetary Fund. Middle East and Central Asia Dept.
This paper discusses Islamic Republic of Mauritania’s 2022 Article IV Consultation and Requests for 42-Month Arrangements under the Extended Credit Facility and the Extended Fund Facility. The Mauritanian authorities’ IMF-supported reform program presents a comprehensive policy package to preserve macroeconomic stability, strengthen the fiscal and monetary policy frameworks, and improve governance, to consolidate the foundations for sustainable, inclusive growth, and reduce poverty. Mauritania’s economic growth has accelerated in 2022, driven primarily by the extractive sectors, while Inflation should stabilize at approximately 11 percent reflecting the central bank tight monetary policy. Mauritania has present and prospective balance of payments (BoP) needs while a confluence of shocks including the war in Ukraine and regional tensions have narrowed the space for policy intervention. The BoP needs could widen considering significant risks to the baseline including a protracted war in Ukraine, tensions in the Sahel region, climate shocks, increasing volatility in international commodity markets, and delays in the start of the Grand Tortue/Ahmeyim offshore gas project.
Keywords:
development effort; Medium-term policy priority; Mauritanian authorities; commodity price movement; IMF arrangement; AIV policy recommendation; Operational risk; Debt sustainability analysis; Currency markets; Global; Middle East and Central Asia; Middle East; North Africa; East Africa
Cover Departmental Papers
Assessing Banking Sector Vulnerabilities in the Gulf Cooperation Council in the Wake of COVID-19
Abdullah Al-Hassan
,
Imen Benmohamed
,
Aidyn Bibolov
,
Giovanni Ugazio
, and
Ms. Tian Zhang
The Gulf Cooperation Council region faced a significant economic toll from the COVID-19 pandemic and oil price shocks in 2020. Policymakers responded to the pandemic with decisive and broad measures to support households and businesses and mitigate the long-term impact on the economy. Financial vulnerabilities have been generally contained, reflecting ongoing policy support and the rebound in economic activity and oil prices, as well as banks entering the COVID-19 crisis with strong capital, liquidity, and profitability. The banking systems remained well-capitalized, but profitability and asset quality were adversely affected. Ongoing COVID-19 policy support could also obscure deterioration in asset quality. Policymakers need to continue to strike a balance between supporting recovery and mitigating risks to financial stability, including ensuring that banks’ buffers are adequate to withstand prolonged pandemic and withdrawal of COVID-related policy support measures. Addressing data gaps would help policymakers to further assess vulnerabilities and mitigate sectoral risks.
Keywords:
COVID-19; banking performance; corporates performance; sovereign-banks-economy nexus; bank asset quality; oil price shock; policy support; assessing banking sector vulnerability; C. bank assets quality; Financial statements; Commercial banks; Loans; Credit; Global; Middle East
Cover IMF Staff Country Reports
Islamic Republic of Mauritania: Fifth Review Under the Extended Credit Facility Arrangement, and Request for Augmentation of Access-Press Release; Staff Report; and Statement by the Executive Director for the Islamic Republic of Mauritania
International Monetary Fund. Middle East and Central Asia Dept.
The COVID-19 pandemic continues to impose severe social and economic hardships in Mauritania, with a sharp contraction of output expected in 2020. The authorities have responded swiftly to the shock with measures to contain the pandemic and alleviate its fallout. They are prioritizing health spending and targeted support to the most vulnerable households and sectors in the economy. Nevertheless, conditions have weakened since the emergency disbursement under the Rapid Credit Facility in April 2020 (SDR 95.68 million, about US$130 million or 74.3 percent of quota) and wider external and fiscal financing gaps are projected.
Keywords:
ISCR; CR; SDR; IMF's executive board; response plan; debt; authority
Cover IMF Staff Country Reports
Islamic Republic of Mauritania: Fifth Review Under the Extended Credit Facility Arrangement, and Request for Augmentation of Access-Press Release; Staff Report; and Statement by the Executive Director for the Islamic Republic of Mauritania
International Monetary Fund. Middle East and Central Asia Dept.
The COVID-19 pandemic continues to impose severe social and economic hardships in Mauritania, with a sharp contraction of output expected in 2020. The authorities have responded swiftly to the shock with measures to contain the pandemic and alleviate its fallout. They are prioritizing health spending and targeted support to the most vulnerable households and sectors in the economy. Nevertheless, conditions have weakened since the emergency disbursement under the Rapid Credit Facility in April 2020 (SDR 95.68 million, about US$130 million or 74.3 percent of quota) and wider external and fiscal financing gaps are projected.
Keywords:
ISCR; CR; SDR; IMF's executive board; response plan; debt; authority; financing gap; key interest rate; IMF's support; COVID-19; Credit; Fiscal stance; Global
Cover IMF Working Papers
The Nature of Islamic Banking and Solvency Stress Testing - Conceptual Considerations
Andreas Jobst
and
Mr. Juan Sole
This paper provides a conceptual overview of key aspects of the design and implementation of solvency stress testing of Islamic banks. Based on existing regulatory standards and prudential practice, the paper explains how Islamic finance principles and their impact on various risk drivers affect the capital assessment of asset-oriented financial intermediation under stress. The formal specification of these risk factors helps operationalize and integrate the stress testing of Islamic banks within established frameworks for financial stability analysis.
Keywords:
WP; stress testing; Islamic banking; Islamic finance principles; capital adequacy; shari’ah compliance.; Islamic bank; rate of return; market risk; operating income; interest rate; deposit base; financial system; asset performance; liabilities consist; Market risk; Credit risk; Islamic finance; Global; Middle East and Central Asia; Southeast Asia; Africa; counterparty risk of a bank; DCR bank; investment risk reserve; investment risk; counterparty risk; asset impairment; E. market risk
Cover IMF Staff Country Reports
Kuwait: 2020 Article IV Consultation-Press Release; Staff Report; and Staff Supplement
International Monetary Fund. Middle East and Central Asia Dept.
This 2020 Article IV Consultation with Kuwait highlights that non-oil growth strengthened to estimated 3 percent in 2019, propelled by government and consumer spending. The challenge to reduce dependence on oil and boost savings has become more urgent. The subdued forecast for oil revenues is weighing on near-term growth and fiscal and external balances. Embedding fiscal measures in a comprehensive reform package that promotes private sector growth, strengthens governance and accountability, and improves public services would help build broad support for reforms. A rules-based fiscal framework would improve management of oil revenues. A rule-based framework would help anchor fiscal policy on a long-term objective of intergenerational equity. It should include a well-calibrated operational rule that helps reconcile long-term savings and near-term economic stabilization objectives. Financial sector reforms should focus on bolstering resilience and deepening inclusion. Sustaining reforms to foster private sector-led and diversified growth will be critical. With limited scope for public employment going forward, a vibrant private sector must emerge to absorb the large number of Kuwaitis entering the labor market in coming years.
Keywords:
ISCR; CR; Kuwait; spending envelope; excl. investment income; Nonoil balance excl. investment income; nonoil GDP; export price; market forces; Personal income; Oil prices; Loans; Global
Cover Policy Papers
Safeguards Assessment—2019 Update
Mr. George M Kabwe
,
Elie Chamoun
,
Riaan van Greuning
,
Mowele Mohlala
, and
Ms. Julia Cardoso
Safeguards assessments are a key pillar of the risk management arrangements for IMF lending. Safeguards assessments aim to mitigate the risks of misuse of Fund resources and misreporting of program monetary data under Fund arrangements. Safeguards assessment reports are confidential and therefore the IMF Executive Board is provided with a periodic report on safeguards activities on a biennial basis, in addition to high-level summaries in member country staff reports on key findings and recommendations. This update on safeguards activity covers the period May 2017 to end-April 2019 (the period).
Keywords:
PP; central bank; governance; audit; risk management framework; lending; governance arrangement; central bank participant; central bank autonomy provision; central bank safeguards framework; central bank authority; Internal audit; Central bank governance; External audit; Auditing; Monetary statistics; Global; Middle East; Western Hemisphere; West Africa; Europe
Cover IMF Working Papers
How Do Changing U.S. Interest Rates Affect Banks in the Gulf Cooperation Council (GCC) Countries?
Mr. Olumuyiwa S Adedeji
,
Yacoub Alatrash
, and
Mr. Divya Kirti
Given their pegged exchange rate regimes, Gulf Cooperation Council (GCC) countries usually adjust their policy rates to match shifting U.S. monetary policy. This raises the important question of how changes in U.S. monetary policy affect banks in the GCC. We use bank-level panel data, exploiting variation across banks within countries, to isolate the impact of changing U.S. interest rates on GCC banks funding costs, asset rates, and profitability. We find stronger pass-through from U.S. monetary policy to liability rates than to asset rates and bank profitability, largely reflecting funding structures. In addition, we explore the role of shifts in the quantity of bank liabilities as policy rates change and the role of large banks with relatively stable funding costs to explain these findings.
Keywords:
WP; bank; rate; liability; liability rate; GCC bank assets rate; panel data; banks scope; sensitive bank; bank level; bank assets rate; liability structure; Central bank policy rate; Deposit rates; Bank soundness; Competition; Commercial banks; Global