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Business and Economics > Banks and Banking

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Cover FinTech Notes
Estimating the Impact of Digital Money on Cross-Border Flows: Scenario Analysis Covering the Intensive Margin
Eugenio M Cerutti
,
Melih Firat
, and
Hector Perez-Saiz
Digital money and digital payments innovations have the potential for improving cross-border payments by reducing costs, enhancing speed, and improving transparency. This note performs an empirical analysis of the potential impact of digital money on the volume and transaction costs of cross-border payments, with a focus on the short-term intensive margin. The market of cross-border payments is very large, with retail transactions having a low share of the total but the highest transaction costs, particularly for remittances. Our illustrative scenarios assume an estimated 60 percent reduction in transaction costs and short-term elasticities to changes in costs estimated from remittances data. The results show two outcomes. First, the cross-border volume increases could be sizable for countries that are large remittance recipients and face expensive transaction costs. Second, even with a large drop in transaction costs, the short-term rise in global cross-border transaction volumes could be limited as a result of the low transaction costs of the wholesale segment. Moving outside the short-term intensive margin, the impact could potentially be much larger as digital currencies and other digital payments innovations—together with tokenization of assets on programmable platforms—could move the financial system into a transformative new era by fostering financial development and promoting further inclusion across borders.
Keywords:
Digital money; cross-border payments; transaction costs; digital payments; payments innovation; cross-border payment; scenario analysis; IMF Fintech Brownbag Seminar; IMF seminar; Remittances; Central Bank digital currencies; Anti-money laundering and combating the financing of terrorism (AML/CFT); Correspondent banking; Global
Cover IMF Staff Country Reports
Tonga: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Tonga
International Monetary Fund. Asia and Pacific Dept
The 2024 Article IV Consultation discusses that Tonga’s economic activity has strengthened, bolstered by consistent remittance flows, continued tourism recovery, and robust construction activities. Inflationary pressures have substantially eased. After peaking at 14.1 percent in September 2022, headline inflation has since been normalizing. The near-term baseline economic outlook remains favorable appropriately supported by expansionary fiscal and monetary policy. Real gross domestic product (GDP) growth is projected to accelerate to 2.4 percent in FY2025, mostly led by continued strength in domestic demand including large public investment projects and a rebound in agricultural output as the effects of El Nino dissipate. The medium-term growth prospects remain uneven, however. Tonga’s long-term growth is projected at 1.2 percent, reflecting its exposure to increasingly frequent natural disasters, persistent loss of workers to emigration, and limited economies of scale due to geographical barriers. Structural reforms with a focus on bolstering disaster resilience, advancing digital transformation, and strengthening governance frameworks to foster a conducive business environment are essential to meet Tonga’s developments goals.
Keywords:
priority safeguards assessment recommendation; Tonga authorities; reference rate; currency basket; intervention currency; Natural disasters; Debt sustainability analysis; Global; Pacific Islands; Australia and New Zealand
Cover Departmental Papers
Report on the Pacific Roundtables: Actions to Address Correspondent Banking and Remittances Pressure
Ms. Alison Stuart
,
Jihad Alwazir
,
Ms. Yan Liu
,
Mr. Scott Roger
,
Mr. Si Guo
,
Chau Nguyen
,
Mr. Emmanuel Mathias
, and
Mr. Jonathan Pampolina
The paper looks at feasible concrete action that can be taken by correspondent and respondent banks, money transfer operators, the Pacific authorities, the Australian and New Zealand authorities, and international organizations.
Keywords:
DPPP; DP; money transfer operator; correspondent banking relationship; accounts open; guidance to member; operator transaction; transfer operator; operator practice; transfer operator account; operator remittance; transfer operator practice; transfer operator closure; correspondent banking link; money transfer operator remittance; Correspondent banking; Remittances; Anti-money laundering and combating the financing of terrorism (AML/CFT); Compliance costs; Multilateral development institutions; Pacific Islands; Global; Australia and New Zealand
Cover Resilience and Growth in the Small States of the Pacific
Resilience and Growth in the Small States of the Pacific
Hoe Ee Khor
,
Mr. Roger P. Kronenberg
, and
Ms. Patrizia Tumbarello

Abstract

Pacific island countries face unique challenges to realizing their growth potential and raising living standards. This book discusses ongoing challenges facing Pacific island countries and policy options to address them. Regional cooperation and solutions tailored to their unique challenges, as well as further integration with the Asia and Pacific region will each play a role. With concerted efforts, Pacific island countries can boost potential growth, increase resilience, and improve the welfare of their citizens.

Keywords:
BOOK; GDP; GDP-weighted distance; financial crisis; market share; U.S. dollar; lending rate; real GDP; Natural disasters; Inflation; Income; Pacific Islands; Global; Asia and Pacific; Australia and New Zealand; Caribbean; IMF staff estimate; IMF staff calculation; business climate shortcoming; Climate change
Cover IMF Staff Country Reports
Tonga: 2016 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Tonga
International Monetary Fund. Asia and Pacific Dept
This paper discusses recent economic developments, economic outlook, risks, and challenges in Tonga. The Tongan economy has been rebounding since a contraction in FY2013. Growth accelerated from 2.1 percent in FY2014 to 3.7 percent in FY2015, supported by construction, tourism, strong remittances, and strong private credit, notwithstanding weather-related disruptions to agricultural production. The FY2016 real GDP growth is projected to remain relatively strong at 3.1 percent, driven by a recovery in agriculture and an increase in construction activity in preparation for the South Pacific Games. However, a protracted period of slower growth in advanced and emerging market economies, particularly in Australia and New Zealand, could weigh on Tonga via aid, remittances, and tourism channels.
Keywords:
ISCR; CR; right; government; Tonga; authority; Tongan authorities; government delivery; Tongan economy; accommodative monetary policy stance; financing gap; Tongan authority; Natural disasters; Credit; Global; Pacific Islands; Australia and New Zealand
Cover IMF Staff Country Reports
Tonga: Staff Report for the 2014 Article IV Consultation
International Monetary Fund. Asia and Pacific Dept
KEY ISSUES Context: Tonga’s economy is rebounding, partially owing to a recovery in agricultural exports. The outlook for tourism is also improving. The reconstruction from a recent cyclone is expected to lead to both a temporary boost to growth and additional financing needs. Risks to the inflation outlook and the external position are low. Fiscal Policy: The projected fiscal cost relating to the cyclone will be largely met by confirmed funding mainly from donor agencies. In the near term, the authorities should focus on reconstruction activities, while a medium-term fiscal strategy should aim at gradually stabilizing and then reducing the debt-to-GDP ratio, in order to improve Tonga’s moderate risk of debt distress. This will require careful execution of investments related to the 2019 South Pacific Games. Monetary Policy: The deleveraging cycle of the Tongan banks appears to be ending, and thus National Reserve Bank of Tonga should prepare to gradually withdraw liquidity and tighten monetary conditions once the current signs of a recovery of credit growth are confirmed. The authorities plan to lower the cost of credit through supportive credit policies, including by commercializing the Tonga Development Bank. The successful implementation of such plan requires sound safeguards, including a robust governance structure and firm risk management and accountability frameworks. Structural Policy: Structural reforms to facilitate the functioning of credit markets need to be implemented with renewed vigor. The authorities’ intention to gradually phase out existing ad hoc tax incentives is well placed. The promotion of foreign direct investments should focus on business-enabling structural reforms, while the use of tax incentives should be minimized and well targeted.
Keywords:
ISCR; CR; Tonga; Tongan authorities; headline consumer price index; inflation outlook; headline inflation; reference range; government regulation; Public and publicly-guaranteed external debt; International reserves; Global; Pacific Islands; Asia and Pacific; Australia and New Zealand
Cover IMF Staff Country Reports
Tonga: 2013 Article IV Consultation
International Monetary Fund. Asia and Pacific Dept
This staff report on Tonga’s 2013 Article IV Consultation discusses the economic development and policies. Banks in Tonga have been fixing their balance sheets since late 2008. Shrinking the loan books and increasing holdings of reserve assets have prompted negative macro-financial linkages, and reduced business confidence. In response, the National Reserve Bank of Tonga has aggressively infused liquidity into the system, and stepped up risk-based supervision. Progress in improving the regulatory and institutional infrastructure has also continued, including inauguration of a credit bureau. Major gains have been made in budget transparency, the establishment of a Treasury Single Account system, and better prioritization of the budget.
Keywords:
ISCR; CR; Tonga; GDP; net; fiscal year; government; reform effort; headline inflation; PFTAC TA; beginning July; banking system; PFTAC input; Government finance statistics; Global; Pacific Islands; Asia and Pacific
Cover IMF Staff Country Reports
Tonga: Staff Report for the 2012 Article IV Consultation
International Monetary Fund
In Tonga, the fiscal position has strengthened but vulnerabilities remain. Directors have welcomed Tonga’s recovery from the global crisis but noted remaining vulnerabilities and a high debt burden. With downside risks clouding the outlook, Directors have emphasized the importance of strengthening policy buffers and the foundation for faster and more inclusive growth. Directors have also encouraged the authorities to implement their fiscal plans within a medium-term framework and to improve further the quality of public spending to meet Tonga’s development objectives.
Keywords:
ISCR; CR; Tonga; debt; IMF debt sustainability analysis; GDP; credit growth; inflation pressure; inflation risk; Tongan economy; Bank credit; Remittances; Global; Australia and New Zealand; East Asia; Pacific Islands; Asia and Pacific; control inflation; remittance inflow
Cover Summary Proceedings of the Sixty-Second Annual Meetings 2008
Summary Proceedings of the Sixty-Second Annual Meetings 2008
International Monetary Fund

Abstract

The speeches made by officials attending the IMF–World Bank Annual Meetings are published in this volume, along with the press communiqués issued by the International Monetary and Financial Committee and the Development Committee at the conclusion of the meetings.

Keywords:
AS; fund surveillance; boards of governors of the International Monetary Fund; financial crisis; committee chairman; lending role; managing director of the International Monetary Fund; surveillance agenda; Climate change; Food prices; Inflation; Global; Africa; Sub-Saharan Africa; Europe; Caribbean; West Africa
Cover IMF Staff Country Reports
Tonga: 2011 Article IV Consultation: Staff Report; Staff Supplement; Public Information Notice on the Executive Board Discussion; and Statement by the Alternate Executive Director for Tonga
International Monetary Fund
Tonga’s economy showed recovery from recent shocks on the back of stronger tourism activity and fiscal expansion. In spite of generous grant inflows, Tonga remains at “high risk of debt distress” according to World Bank-IMF debt sustainability analysis. Executive Directors stressed that fiscal consolidation is necessary to ensure fiscal sustainability, and encouraged authorities to set up a comprehensive debt-management strategy to limit the credit and currency risks. Directors welcomed the government’s policy to pursue structural reforms to promote private sector activity and restore fiscal sustainability.
Keywords:
ISCR; CR; exchange rate; private sector; IMF debt sustainability analysis; Tongan authorities; Tonga energy road map endeavour; resource utilization; government plan; growth momentum; Bank credit; Public and publicly-guaranteed external debt; Global; Pacific Islands