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Business and Economics > Public Finance

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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
Nicaragua: 2023 Article IV Consultation-Press Release; and Staff Report
International Monetary Fund. Western Hemisphere Dept.
The 2023 Article IV Consultation highlights that Nicaragua’s economy has remained resilient in the face of multiple shocks, supported by appropriate economic policies, substantial buffers, and multilateral support. The external and fiscal positions are assessed to be sustainable under the baseline scenario, given the current policy mix and financing plans. In 2024 and the medium-term real Gross domestic Product (GDP) growth is expected to converge to potential sustained by domestic demand and remittances. Risks to this outlook include on the upside higher than projected real GDP growth due to sustained recovery in the domestic demand and remittances, especially in the near term, and on the downside a deterioration in the terms of trade, a more severe global downturn than currently incorporated into the baseline scenario, natural disasters, and stricter international sanctions. The report suggests investing in human capital and infrastructure; implementing policies to raise labor force participation and enhance the business environment by strengthening government institutions and frameworks in the areas of contract enforcement, protecting property rights, and resolving insolvencies.
Keywords:
government institution; government deposit; exports threshold; authorities' effort; financial asset; burden indicator; central bank; Public sector; Government finance statistics; Foreign direct investment; Global; Central America
Cover IMF Staff Country Reports
Costa Rica: Selected Issues
International Monetary Fund. Western Hemisphere Dept.
This Selected Issues paper focuses on the neutral interest rate in Costa Rica. Estimates of Costa Rica’s real natural rate of interest are between 0 and 3 percent, with a suite of semistructural and univariate methods reaffirming this conclusion at close to 1 percent. This toolkit of multiple differing methods accounts for characteristics of the Costa Rican economy and suggests current monetary policy remains restrictive. Univariate estimates for Costa Rica are between those for the United States and largest regional peers. Structural changes to the Costa Rican economy, particularly in recent years, have important implications for the movement in the neutral rate. A suite of univariate methods also reaffirms this conclusion and suggests current monetary policy remains restrictive. Estimates for Costa Rica are between the United States and largest regional peers. Replicating the univariate approach for the United States and other countries in Latin America suggests Costa Rica has a somewhat lower neutral real interest rate than the largest regional peers, Brazil and Mexico, which currently appear to have neutral rates above 2 percent but above the United States.
Keywords:
labor market characteristic; refugees in Costa rica; estimation uncertainty; neutral real interest rate; card payment fee; Real interest rates; Migration; Labor markets; Social assistance spending; Caribbean
Cover IMF Staff Country Reports
Nicaragua: 2022 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Nicaragua
International Monetary Fund. Western Hemisphere Dept.
This 2022 Article IV Consultation highlights that prudent macroeconomic policies, substantial pre-crisis buffers and official external financial assistance helped Nicaragua’s economy rebound from a protracted contraction during 2018–2020, caused by the socio-political crisis of 2018, two major hurricanes in 2020, and the pandemic. Real gross domestic product (GDP) growth is expected to moderate to 3 percent in 2023, due mainly to the global slowdown. Inflation—which reached 11.4 percent in November 2022, primarily due to import price increases—is projected to decline in 2023 in line with lower growth and an expected significant decline in global inflation. In the medium term, real GDP is expected to grow by about 3 1/2 percent, below the pre-crisis historical average, as credit to the private sector and private investment cautiously recover. The favorable outlook is subject to uncertainty and risks on the downside, primarily due to external developments, natural disasters, or deterioration in the business climate and stricter international sanctions.
Keywords:
implementation capacity; inflation expectation; IMF team; article IV consultation swith Nicaragua; authorities' measure; Medium-term real GDP growth; Public sector; Government finance statistics; Debt sustainability analysis; Global; Central America
Cover IMF Staff Country Reports
Nicaragua: Requests for Purchase under the Rapid Financing Instrument and Disbursement under the Rapid Credit Facility-Press Release; Staff Report; and Statement by the Executive Director for Nicaragua
International Monetary Fund. Western Hemisphere Dept.
Nicaragua faces an acute crisis as the COVID-19 shock comes on top of a two- year recession. So far, the speed of transmission of the pandemic in Nicaragua, in terms of officially confirmed cases, has been slower than in neighboring countries, but this may understate the true spread of the disease. The pandemic is expected to produce the third year of consecutive recession and lead to large fiscal and external financing needs given the impact of voluntary distancing and regional and global spillovers. The very limited fiscal space, eroded by the ongoing recession and the limited external financing, constrains the authorities’ ability to self-finance the emergency response.
Keywords:
ISCR; CR; RFI financing; pandemic shock; public health expenditure; RCF-RFI disbursement; health response; mitigation measure; RCF-RFI resource; COVID-19; Currencies; Public sector; Credit; Global
Cover IMF Staff Country Reports
Nicaragua: 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Nicaragua
International Monetary Fund. Western Hemisphere Dept.
This 2019 Article IV Consultation with Nicaragua highlights that social unrest and its aftermath eroded confidence and caused large capital and bank deposits outflows that resulted in a prolonged output contraction. Banks cut lending, which exacerbated the downturn. Faced with sharply lower revenues and a severe tightening in available financing, including on account of sanctions, the government was forced to cut spending and adopt a procyclical tax package. The economy is projected to continue to contract in the near term as it adjusts to weaker confidence and lower external financing. The sharp contraction in credit will continue to depress investment, and the tight fiscal and external financing situation will continue to drag down medium-term growth. The key risks relate to further erosion in confidence and renewed deposit outflows. The imposition of additional sanctions by trading partners could also heighten economic stress. It is recommended to maintain a conservative fiscal stance in 2020 remains the key to maintain macroeconomic stability. Curbing expenditures on goods and services will allow increased spending on social programs, social safety nets, and public investment, which would lead to more equitable and sustainable growth.
Keywords:
ISCR; CR; inflation development; central bank of Nicaragua; headline inflation; staff appraisal; IMF staff calculation; crawling peg exchange regime; consumer price inflation; U.S. dollar; Currencies; Public sector; Central America
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 Staff Country Reports
Nicaragua: 2017 Article IV Consultation-Press Release; and Staff Report
International Monetary Fund. Western Hemisphere Dept.
This 2017 Article IV Consultation highlights Nicaragua’s robust macroeconomic performance in 2016. Real GDP grew by 4.7 percent in 2016, supported by strong domestic demand, while inflation remained subdued at 3.1 percent as of the end of 2016, owing largely to the contribution of food prices. The current account deficit for 2016 is estimated to have narrowed to 8.6 percent of GDP, compared with 9 percent in 2015. This consolidation is largely explained by maquila exports, which have been better captured owing to improvements in statistical compilation. The current account deficit remained financed by foreign direct investment and other long-term inflows.
Keywords:
ISCR; CR; debt; exchange rate; current account; real GDP; private sector; crawling peg exchange regime; external shock; wage bonus; liquidity management tool; compilation methodology; IADB disbursement; debt dynamic; Currencies; Public sector; Fiscal stance; Central America; Global; Caribbean
Cover IMF Staff Country Reports
Nicaragua: Selected Issues
International Monetary Fund. Western Hemisphere Dept.
This Selected Issues paper analyzes Nicaragua’s social security system, which is projected to run out of liquid reserves by 2019, several years earlier than anticipated. To avoid burdening the budget, reforms to the system are urgently needed. A deep actuarial, economic, and operational analysis is needed to design a comprehensive reform program. Such a program must ensure that the defined-benefit, pay-as-you-go system can sustain itself for another generation of workers and that improved health care benefits can be maintained. A politically acceptable, pragmatic solution appears within reach. However, the authorities should act quickly to avoid a costly bailout of the system.
Keywords:
ISCR; CR; GDP; Nicaragua; free zone; commodity; transfer pricing; CPS deficit; export tax free zones; commodity export; CPS balance; trade shock; commodity TP regulation; Pension spending; Pensions; Climate change; Natural disasters; Global; Caribbean; Central America
Cover IMF How To Notes
How to Check Integrity of Fiscal Data
Mr. Pokar D Khemani
and
Mr. Benoit Wiest
The accuracy and reliability of government accounts and fiscal data is an issue in a number of countries, with significant and persistent discrepancies that can indicate underlying weaknesses in the country’s public financial management system. This note provides guidance on how to detect issues with data quality, perform integrity checks, and reconcile fiscal data from various sources. It discusses the importance of reconciliation to provide reasonable assurance on the quality and reliability of government fiscal data, explores the main reasons for which discrepancies may arise, and explains how to conduct quality checks. The note concludes with recommendations for country teams of concrete steps to ensure data quality.
Keywords:
FADHTN; HTN; balance; bullet; suspense account; bank account; debt; bank reconciliation; government debt; revenue code; accounting system; cash deficit; balances of suspense accounts; year-end cash balance; central bank; Government finance statistics; Fiscal accounting and reporting; Financial statistics; Budget planning and preparation; Middle East and Central Asia; Asia and Pacific; Western Hemisphere; Europe; Africa