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Business and Economics > Finance: General

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Cover IMF Staff Country Reports
Nicaragua: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Nicaragua
International Monetary Fund. Western Hemisphere Dept.
The Nicaraguan economy is experiencing robust growth. Real GDP growth accelerated to around 4½ percent in 2023 and the first half of 2024, from about 3.8 percent in 2022, on the back of robust domestic demand, while inflation is moderating. Prudent macroeconomic policies and record-high remittances sustained this performance, a decrease in the estimated poverty ratio, and also led to twin surpluses, a steady decline in debt, and the accumulation of strong buffers. Gross international reserves reached US$5.7 billion, or 7.2 months of imports, by end-October 2024. The economy remains open and resilient, after confronting multiple large shocks, and on a backdrop of transfers of private property to the state, international sanctions, and reorientation of official financing. Going forward, domestic and international political developments may impact economic performance, by potentially increasing the cost of doing business and impacting other cross-border flows.
Keywords:
update safeguard assessment; transmission mechanism; Policy coordination; safeguards recommendation; tax audit procedure; exports threshold; authority of the BCN; headline inflation; Public sector; Financial sector stability; Global; Central America; Caribbean
Cover IMF Staff Country Reports
El Salvador: 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for El Salvador
International Monetary Fund. Western Hemisphere Dept.
This 2019 Article IV Consultation discusses that structural reforms, strengthened policy frameworks and the ongoing smooth political transition have laid the foundations for sustained growth in El Salvador. The discussions focused on policies that build on these achievements and address fiscal vulnerabilities, boost long-term growth, and strengthen the governance, anticorruption and Anti-Money Laundering and Combating the Financing of Terrorism frameworks. Continued US dollar appreciation led to a significant decline in inflation and widening of the current account deficit. The authorities agreed that debt would continue to drift upward in the absence of measures, and that weaker-than-expected global growth could have a negative impact on the domestic economy. The authorities emphasized their commitment to guarantee a smooth political transition by sharing information with the new administration and by inviting the Audit Office to oversee the handover process. It is recommended to improve the governance and anticorruption frameworks by increasing the fiscal transparency of the 2020 budget laws, strengthening audit and spending controls, and promptly implementing electronic invoicing.
Keywords:
ISCR; CR; debt; IMF staff estimate; authority; dollar; financial system; liability positions vis-à-vis nonresident; public funds; interest bill; prevention effort; Public sector; Fiscal stance; Fiscal consolidation; Global; Central America
Cover IMF Working Papers
Dollarization and Financial Development
Mr. Geoffrey J Bannister
,
Mr. Jarkko Turunen
, and
Malin Gardberg
Despite significant strides in financial development over the past decades, financial dollarization, as reflected in elevated shares of foreign currency deposits and credit in the banking system, remains common in developing economies. We study the impact of financial dollarization, differentiating across foreign currency deposits and credit on financial depth, access and efficiency for a large sample of emerging market and developing countries over the past two decades. Panel regressions estimated using system GMM show that deposit dollarization has a negative impact on financial deepening on average. This negative impact is dampened in cases with past periods of high inflation. There is also some evidence that dollarization hampers financial efficiency. The results suggest that policy efforts to reduce dollarization can spur faster and safer financial development.
Keywords:
WP; deposit dollarization; dollarization; financial development; financial deepening; financial inclusion; developing economies; credit dollarization; dollarization determinant; dollarization variable; impact of dollarization; Financial sector development; Credit; Bank deposits; Inflation; Eastern Europe
Cover IMF Working Papers
Power It Up: Strengthening the Electricity Sector to Improve Efficiency and Support Economic Activity
Gabriel Di Bella
and
Mr. Francesco Grigoli
Poor performance of the electricity sector remains a drag to economic efficiency and a bottleneck to economic activity in many low-income countries. This paper proposes a number of models that account for different equilibria (some better, some worse) of the electricity sector. They show how policy choices (affecting insolvency prospects or related to rules for electricity dispatching or tariff setting), stochastic generation costs, and initial conditions, affect investment in generation and electricity supply. They also show how credible (non-credible) promises of stronger enforcement to reduce theft result in larger (smaller) electricity supply, lower (higher) government subsidies, and lower (higher) tariffs and distribution losses, which in turn affect economic activity. To illustrate these findings, the paper reviews the experience of Haiti, a country stuck in a bad equilibrium of insufficient supply, high prices, and electricity theft; and that of Nicaragua, which is gradually transitioning to a better equilibrium of the electricity sector.
Keywords:
WP; economic activity; private sector; cash flow; Credible and Non-Credible Promises; Economic efficiency; Economic infrastructure; Electricity Sector; Electricity Theft; Haiti; Nicaragua; generation cost; distribution loss; objective function; electricity tariff; Electricity; Tariffs; Oil prices; Solvency; Government subsidies
Cover IMF Working Papers
The Determinants of Banks' Liquidity Buffers in Central America
Ms. Corinne C Delechat
,
Ms. Camila Henao Arbelaez
,
Ms. Priscilla S Muthoora
, and
Svetlana Vtyurina
Banks’ liquidity holdings are comfortably above legal or prudential requirements in most Central American countries. While good for financial stability, high systemic liquidity may nonetheless hinder monetary policy transmission and financial markets development. Using a panel of about 100 commercial banks from the region, we find that the demand for precautionary liquidity buffers is associated with measures of bank size, profitability, capitalization, and financial development. Deposit dollarization is also associated with higher liquidity, reinforcing the monetary policy and market development challenges in highly dollarized economies. Improvements in supervision and measures to promote dedollarization, including developing local currency capital markets, would help enhance financial systems’ efficiency and promote intermediation in the region.
Keywords:
WP; bank; deposit; liquid asset; Central America; bank liquidity; credit; dollarization; excess liquidity; foreign banks; liquidity holding; bank characteristic; CAPDR bank; customer deposit; deposit dollarization; bank ownership; Liquidity requirements; Liquidity; Liquidity management; Global; South America; Eastern Europe
Cover IMF Staff Country Reports
Nicaragua: Fourth and Fifth Review Under the Three-Year Arrangement Under the Extended Credit Facility, Requests for Extension of the Arrangement, Rephasing of Access, and Waiver of Nonobservance of Performance of Criterion, and Financing Assurances Review-Staff Report; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Nicaragua
International Monetary Fund
Economic performance in Nicaragua has been better than envisaged; nonetheless, vulnerabilities remain and will be compounded by electoral uncertainties. The decision to use part of the strong revenue performance to lower the fiscal deficit is appropriate. Exchange-rate and monetary policy remain broadly adequate. Fiscal adjustment should set the stage for a strong program of fiscal consolidation following the elections. Continued vigilance in the financial sector will be critical. Improvement in reporting and monitoring of foreign aid flows and transparency is necessary.
Keywords:
ISCR; CR; waiver of nonobservance of performance criterion; Three-Year arrangement; Three-Year; waiver; authority; growth potential; requests for extension of the arrangement; Nicaraguan authorities; Aid flows; Government debt management; Global; Central America
Cover Central America
Central America
Structural Foundations for Regional Financial Integration
International Monetary Fund

Abstract

Intraregional financial activity in Central America has grown substantially in the past decade, contributing to efficiency and economic development. At the same time, the expansion of activities by regional conglomerates has increased the challenges to supervisory authorities of containing the risks of contagion. Prepared as part of the Central America Financial Sector Regional Project by an IMF and World Bank staff team, this book outlines trends in the region's financial sector integration, supervisory responses, development of the insurance sector, payment and securities settlement arrangements, and worker remittances. It addresses the many common policy challenges facing Central American countries--Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama--in financial sector reform. The book offers key policy recommendations.

Keywords:
BOOK; remittance; bank; remittance flow; payment system; financial institution; foreign currency; remittance securitization transaction; remittance cost; insolvency proceeding; Payment systems; Insurance; Insurance companies; Securities; Remittances; Central America; Global
Cover IMF Survey
IMF Survey, Volume 31, Issue 22
International Monetary Fund. External Relations Dept.
IMF economists and researchers from outside the institution gathered at the IMF’s Third Annual Research Conference on November 7-8. The conference had an overarching theme of capital flows and global governance but also dealt with an eclectic array of other issues that economists at the IMF and elsewhere are exploring.
Keywords:
SV; IMF Concludes; IMF's website; SRF disbursement; governance; IMF executive board reviews data provision; IMF publication service; IMF decision; IMF procedure; Collective action clauses; Economic recession; Capital flows; Income inequality; Gold; Global; Central America; Sub-Saharan Africa
Cover IMF Survey
IMF Survey: Volume 28, Issue 18
International Monetary Fund. External Relations Dept.
The Web edition of the IMF Survey is updated several times a week, and contains a wealth of articles about topical policy and economic issues in the news. Access the latest IMF research, read interviews, and listen to podcasts given by top IMF economists on important issues in the global economy. www.imf.org/external/pubs/ft/survey/so/home.aspx
Keywords:
SV; Policy framework paper; IMF's website; IMF staff mission; IMF staff country report; Facility figure; reserve Facility; IMF staff country; Emerging and frontier financial markets; International capital markets; Structural reforms; Debt relief; Global; West Africa; Baltics