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Business and Economics > Banks and Banking

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Cover IMF Staff Country Reports
Haiti: Staff-Monitored Program-Press Release and Staff Report
International Monetary Fund. Western Hemisphere Dept.
Recent developments. Haiti is facing exceptionally challenging circumstances. The deteriorating security environment, which reached crisis proportions in the first few months of 2024, has continued to worsen, disrupting supply chains (particularly energy and basic services) and feeding inflationary pressures. In November 2024, Haiti's transitional Presidential Council designated Prime Minister Alix Didier Fils-Aimé to form a new government with a time-bound mandate through next elections. The government has a narrow but important window of opportunity to implement reforms that could help restore the country’s potential over the medium term.
Keywords:
governance Diagnostic Report; SMP lapse; government priority; transparency policy; management of the International Monetary Fund; PROGRAM monitoring; SMP commitment; Credit; International reserves; Global
Cover IMF Staff Country Reports
Haiti: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Haiti
International Monetary Fund. Western Hemisphere Dept.
The 2024 Article IV Consultation highlights that Haiti faces an unprecedented multidimensional crisis encompassing humanitarian, economic, social, and security problems. The economy has a low tax base and a large informal sector that relies heavily on volatile remittance flows. Haiti’s macroeconomic outlook is challenging and subject to elevated uncertainty. The supply-side shock caused by the security crisis would continue to greatly affect growth and feed inflation unless the security outlook improves. The analytical work underpinning the policy discussions, prepared by staff in agreement with the authorities, focuses on strengthening policy frameworks to enhance resilience. The report recommends implementing the budget for FY2025 and keeps the monetary financing of the budget to zero, consistent with the objective of price stability. It is also recommended to provide more timely data to the IMF and enhance data transparency through timeline publication of core economic data. It can also be beneficial to adopt measures to strengthen revenue collection, expenditure management and controls and increase budget allocations for social spending and for protecting the most vulnerable—and assess their impact.
Keywords:
IMF team; staff appraisal; IMF staff representative; former minister of economy; Advisor work; Debt sustainability; Caribbean; Western Hemisphere
Cover IMF Staff Country Reports
Haiti: First Review Under the Staff-Monitored Program-Press Release; and Staff Report
International Monetary Fund. Western Hemisphere Dept.
This paper highlights Haiti’s First Review under the Staff-Monitored Program (SMP). The SMP will help the government restore macroeconomic stability and lower inflation―a key goal given the burden of high inflation on the poor. The SMP seeks to advance decisive governance reforms to enhance accountability. In particular, it emphasizes greater accountability through stronger public finance management, revenue administration, transparency, and anti-corruption measures. Progress on governance is key to ensure inclusive growth. The authorities have taken steps to strengthen accountability in the collection and use of public resources and have boosted the transparency of public procurement for emergency resources. IMF staff will continue to work closely with the authorities to support implementation of their program and help them build public support. Indeed, most elements of the authorities’ program are underpinned by ongoing IMF technical assistance. The IMF Fund will also continue to coordinate closely with Haiti’s other development partners to leverage efforts in support of common objectives.
Keywords:
Haiti's Staff-Monitored Program; transparency policy; central bank financing; management of the International Monetary Fund; governance reform; Social assistance spending; Energy subsidies; Commercial banks; Global
Cover IMF Staff Country Reports
St. Kitts and Nevis: 2018 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for St. Kitts and Nevis
International Monetary Fund. Western Hemisphere Dept.
Growth decelerated marginally in 2017, as the continued decline in CBI inflows slowed growth in construction. Consumer inflation was low, partly due to a small contraction in food prices. The overall fiscal balance remained in surplus but has deteriorated markedly since its 2013- peak, and the debt-to-GDP ratio increased marginally from the previous year. The current account deficit remains high and only marginally declined in 2017, as the decline in CBI receipts was more than offset by growing tourism receipts and a significant decrease in imports. Foreign reserves at the ECCB remained at comfortable levels, well above the various reserve-adequacy metrics. The banking sector has reported capital and liquidity ratios that are well above the regulatory minimum but has elevated NPLs and risks, including delays in completing the debt-land swap arrangement and loss of Corresponding Banking Relationships (CBRs).
Keywords:
SKN government; SKN economy; CBI program; NPL resolution strategy; due diligence; Commercial banks; Public sector; Government finance statistics; Credit; Caribbean
Cover IMF Working Papers
Central Bank Independence and Inflation in Latin America—Through the Lens of History
Mr. Luis Ignacio Jácome
and
Samuel Pienknagura
We study the link between central bank independence and inflation by providing narrative and empiricial evidence based on Latin America’s experience over the past 100 years. We present a novel historical dataset of central bank independence for 17 Latin American countries and recount the rocky journey traveled by Latin America to achieve central bank independence and price stability. After their creation as independent institutions, central bank independence was eroded in the 1930s at the time of the Great Depression and following the abandonement of the gold exchange standard. Then, by the 1940s, central banks turned into de facto development banks under the aegis of governments, sawing the seeds for high inflation. It took the high inflation episodes of the 1970s and 1980s and the associated major decline in real income, and growing social discontent, to grant central banks political and operational independence to focus on fighting inflation starting in the 1990s. The empirical evidence confirms the strong negative association between central bank independence and inflation and finds that improvements in independence result in a steady decline in inflation. It also shows that high levels of central bank independence are associated with reductions in the likelihood of high inflation episodes, especially when accompanied by reductions in central bank financing to the central government.
Keywords:
Central Bank Independence; Inflation; Latin America; inflation episode; independence result; CBI index; gold exchange; finance government expenditure; inflation distribution; executive branch; fiscal dominance; country level; inflation expectation; term of office; credit to the government; inflation inertia; Latin American country; Central bank autonomy; Central bank legislation; Bank credit; Central bank organization; Central America; South America
Cover IMF Staff Country Reports
Haiti: Staff-Monitored Program-Press Release; and Staff Report
International Monetary Fund. Western Hemisphere Dept.
This paper highlights Haiti’s Staff-Monitored Program (SMP) and report proceedings. It is not feasible for Haiti to implement an upper credit tranche (UCT) IMF-supported program at this time due to the weakened policy frameworks and erosion in administrative capacity during the protracted crisis. The proposed SMP ending May 31, 2023 would help build capacity, support efforts to reduce inflation and raise growth, strengthen fiscal and monetary policy frameworks, address governance weaknesses and combat corruption, and take concrete steps to strengthen social assistance. A successful SMP is needed to build a track record of policy implementation that would improve Haiti’s prospects for a UCT program. It is recommended to mobilize revenues and strengthen public finance management, notably with higher tobacco, alcohol, and car excises, expansion and simplification of the tax base, and measures to strengthen expenditure management and controls. The program also recommends to strengthen the framework for monetary and exchange rate policies by clarifying the objectives and modalities for liquidity and foreign exchange rate operations.
Keywords:
SMP staff report; SMP policy recommendation; central bank financing; limit foreign exchange; transparency policy; Fuel prices; Energy subsidies; Credit; Commercial banks; Caribbean; Global
Cover IMF Working Papers
Debt Dynamics in Emerging and Developing Economies: Is R-G a Red Herring?
Ms. Marialuz Moreno Badia
,
Juliana Gamboa-Arbelaez
, and
Yuan Xiang
In the wake of the COVID-19 pandemic, debt levels in emerging and developing economies have surged raising concerns about fiscal sustainability. Historically, negative interest-growth differentials in these countries have played a debt-stabilizing role. But is this enough to prevent countries from falling into debt distress? Drawing from a sample of 150 emerging and developing economies going back to the 1970s, we find that interest-growth differentials have remained relatively low, dampening debt increases in the run up to a crisis. But in the face of persistent primary deficits, debt service tends to rise abruptly—particularly in emerging markets—and a fiscal crisis ensues. There is also evidence that a large part of the debt build-up around crises stems from valuation effects associated with external debt and the materialization of contingent liabilities. These findings underscore that, though not necessarily a red-herring, low interest-growth differentials cannot fully offset the deleterious effects of large fiscal deficits, forex exposures, or hidden debts.
Keywords:
dampening debt; interest-growth differential; debt build-up; debt-stabilizing role; debt Decomposition; Debt sustainability analysis; Real interest rates; Contingent liabilities; Global
Cover IMF Working Papers
Do Enhanced Collective Action Clauses Affect Sovereign Borrowing Costs?
Kay Chung
and
Mr. Michael G. Papaioannou
This paper analyzes the effects of including collective action clauses (CACs) and enhanced CACs in international (nondomestic law-governed) sovereign bonds on sovereigns’ borrowing costs, using secondary-market bond yield spreads. Our findings indicate that inclusion of enhanced CACs, introduced in August 2014, is associated with lower borrowing costs for both noninvestment-grade and investment-grade issuers. These results suggest that market participants do not associate the use of CACs and enhanced CACs with borrowers’ moral hazard, but instead consider their implied benefits of an orderly and efficient debt resolution process in case of restructuring.
Keywords:
WP; collective action clause; yield to maturity; enhanced CACs; sovereign bond
Cover IMF Staff Country Reports
Colombia: Request for an Arrangement Under the Flexible Credit Line and Cancellation of the Current Arrangement-Press Release; Staff Report; and Statement by the Executive Director for Colombia
International Monetary Fund. Western Hemisphere Dept.
This paper discusses Colombia’s Request for an Arrangement Under the Flexible Credit Line (FCL) and Cancellation of the Current Arrangement. Colombia has very strong policy frameworks—anchored by a flexible exchange rate, a credible inflation targeting-regime, effective financial sector supervision and regulation, and a structural fiscal rule—that have served as a basis for the economy’s resilience prior to the coronavirus disease 2019 pandemic. During this time, Colombia has made remarkable efforts to integrate a substantial number of migrants from Venezuela that boosted domestic demand but widened external vulnerabilities. The new arrangement under the FCL is expected to help Colombia manage heightened external risks, protect ongoing efforts to effectively respond to the pandemic, integrate migrants, foster inclusive growth, and reduce external vulnerabilities. Despite higher external vulnerabilities, risks, and stress, the new arrangement can be maintained at the same access level because the authorities have built higher external buffers by accumulating significant additional reserves since the 2018 FCL request. The arrangement should boost market confidence, and combined with the comfortable level of international reserves, provide insurance against downside risks.
Keywords:
ISCR; CR; Colombia; Colombia's vulnerability; Colombia manage; SDR; FCL arrangement; FCL facility; market confidence; FCL report; FCL renewal; central bank of Colombia access; Oil prices; Credit; Current account deficits; Global
Cover IMF Staff Country Reports
Haiti: Request for Disbursement Under the Rapid Credit Facility-Press Release; Staff Report; and Statement by the Executive Director for Haiti
International Monetary Fund. Western Hemisphere Dept.
This paper discusses Haiti’s Request for Disbursement Under the Rapid Credit Facility. Coronavirus disease 2019 (COVID-19) poses a major challenge for Haiti, a country in a fragile situation with very limited healthcare services, just emerging from two years of socio-political instability and worsening economic hardship. Measures are being taken by the government to stop the spread of the virus and to cushion the economic impact of the shock. IMF emergency support under the Rapid Credit Facility will help fill the balance of payments gap and create fiscal space for essential health expenditures, income support to workers, and cash and in-kind transfers to households. In order to address the crisis, scarce budgetary resources will need to be allocated to critical spending on disease containment and increased social assistance to the most vulnerable. In order to ensure the appropriate use of emergency financing, the authorities should prepare monthly budget execution reports on COVID-19 expenditures and undertake an ex-post financial and operational audit of COVID-related operations.
Keywords:
ISCR; CR; IMF financing support; financing; financing gap; IMF support; Haitian authorities; IMF staff; RCF disbursement; COVID-19; Credit; Budget planning and preparation; Global