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Law > Business and Financial

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Cover IMF Staff Country Reports
Malaysia: 2025 Article IV Consultation-Press Release; and Staff Report
International Monetary Fund. Asia and Pacific Dept
Malaysia’s economic performance has significantly improved in 2024, supported by strong domestic and external demand. Disinflation is taking hold and external pressures have eased. The favorable economic conditions provide a window of opportunity to build macroeconomic policy buffers and accelerate structural reforms, especially as risks to growth are tilted to the downside amid an uncertain global outlook. Risks to the inflation outlook are tilted to the upside, including from global commodity price shocks and potential wage pressures.
Keywords:
upside inflation risk; Malaysia's obligation; asset forfeiture regime; upside risk; upside growth risk; Inflation; Anti-money laundering and combating the financing of terrorism (AML/CFT); Credit; Global
Cover Departmental Papers
Navigating External Shocks in Southeast Asia's Emerging Markets: Key Lessons and Challenges in Applying the IMF’s Integrated Policy Framework
Corinne C Delechat
,
Umang Rawat
, and
Ara Stepanyan
As relatively small open economies, South-East Asian emerging markets (Indonesia, Malaysia, Philippines and Thailand or ASEAN-4) are highly susceptible to external shocks—both financial and real—that could induce large capital flows and exchange rate volatility that could lead to foreign exchange market dysfunction. With the exception of Bank Negara Malaysia, ASEAN-4 central banks mostly have flexible inflation-targeting frameworks for monetary policy implementation. Their main policy objectives include medium-term price stability, sustainable economic growth, and financial stability. Central Banks in ASEAN-4 economies have been early pilots in the operationalization of the IMF’s Integrated Policy Framework (IPF) in 2022-23, given their experience in using multiple policy tools besides the monetary policy rate, including macroprudential measures, foreign exchange intervention (FXI), and capital flow management measures, to achieve their multiple objectives. They have welcomed the IPF as a systematic, frictions-based approach to analyze the use of these multiple tools to manage trade-offs across policy objectives. This paper takes stock of the experience from these pilots, both from the perspective of country authorities and of IMF country teams. It aims at distilling key lessons, which could be used to inform broader IPF operationalization. The IPF conceptual framework and a related quantitative model were used to assess policy trade-offs in ASEAN-4 in the event of adverse external shocks. These applications reaffirmed the importance of using monetary policy to address persistent inflationary pressures stemming from real shocks and allowing the exchange rate to act as a shock absorber. However, a complementary use of FXI could improve trade-offs between price, financial, and output stability when economies are faced with large and financial shocks that result in abrupt spikes in uncovered interest rate parity premia resulting in inefficiently tight financial conditions that could hurt growth or risking to de-anchor inflation expectations. The IPF pilots also highlighted some challenges faced when operationalizing IPF principles, notably regarding the assessment of frictions and shocks that might justify the use of FXI. In particular, country teams at times lacked sufficient information to adequately assess the extent of frictions. Moreover, the time-varying nature of IPF frictions and the non-linear effects of shocks make it difficult to assess situations when benefits of a complementary use of FXI would overweigh its costs.
Keywords:
ASEAN; foreign- exchange intervention; Inflation targeting; Integrated policy framework; capital flows; IPF pilot; market dysfunction; IMF country team; IPF model; Policy mix; IMF seminar participant; Currency markets; Exchange rates; Inflation; Southeast Asia; Global
Cover IMF Staff Country Reports
Libya: Selected Issues
International Monetary Fund. Middle East and Central Asia Dept.
This Selected Issues paper identifies the sources and quantifies the exchange market pressures on the Libyan dinar. The paper highlights that: (1) the cumulative pressure on the exchange rate has been negative; and (2) despite the alternating appreciation and depreciation pressures, foreign exchange reserves have remained relatively stable. The authorities’ toolkit is limited: they strive to maintain the stock of reserves at a high level and to keep the exchange rate peg intact, all without the use of fiscal policy or of conventional monetary policy instruments. Therefore, developing conventional monetary policy tools and making sure that fiscal policy is consistent with the overall macroeconomic objectives would help the authorities achieve their goals without resorting to capital flow measures. While Libya had periods of both depreciation and appreciation pressures, overall, it faced substantial depreciation pressure. In other words, Libya’s policies over the medium term were not in line with the three-pronged macroeconomic objective of maintaining high foreign reserves, a pegged official exchange rate, and a narrow gap between the parallel and the official exchange rates. The findings suggest that additional monetary tools and the use of fiscal policy can help contain the parallel market premium and avoid the use of capital flow measures.
Keywords:
exchange market pressure; EMP index; copyright page; weakening exchange rate; market rate; Currency markets; Exchange rates; International reserves; Depreciation; Eastern Europe; Global
Cover Technical Assistance Reports
Kingdom of Eswatini: Technical Assistance Report-Financial Sector Stability Review
International Monetary Fund. Monetary and Capital Markets Department
and
International Monetary Fund. Statistics Dept.
The IMF conducted a diagnostic review of the financial system of the Kingdom of Eswatini and proposed a Technical Assistance Roadmap to support the authorities’ detection of risks and vulnerabilities and to enhance capacity in financial sector oversight. The financial stability module focused on areas agreed with the country authorities: financial stability and systemic risk monitoring, macroprudential frameworks and tools; crisis management and financial safety net; and supervision and regulation of banks, nonbank deposit-taking institutions, insurance, and retirement funds. The financial sector statistics module focused on key gaps in monetary and financial statistics and financial soundness indicators that hamper financial stability analysis.
Keywords:
Kingdom of Eswatini; Eswatini; CBE; FSRA; FSSR; financial stability; systemic risk; macroprudential frameworks; stress testing; crisis management; financial safety net; banking supervision and regulation; nonbanking supervision and regulation; deposit-taking institutions; insurance; and retirement funds.; IMF MCM; IMF Financial Sector Stability Review; IMF's MCM department; CBE governor; financial institutions Act; Eswatini building societies; Financial sector stability; Nonbank financial institutions; Retirement; Insurance companies; Africa; Southern Africa; East Africa
Cover IMF Staff Country Reports
Chile: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Chile
International Monetary Fund. Western Hemisphere Dept.
The 2023 Article IV Consultation highlights that macroeconomic imbalances built during the pandemic have been largely resolved, supported by tighter macroeconomic policies deployed during late 2021–22 in Chile. Growth is expected to pick up to close to 2 percent in 2024 and 2–2.5 percent in the medium term. Inflation is projected to converge to the 3-percent target in 2024. Key external risks are the uncertainties around the potentially higher-for-longer interest rates in advanced economies, a growth slowdown in major trading partners, and the intensification of regional conflicts in the world. Policies have supported macroeconomic stability. In the context of disinflation acceleration, the Central Bank of Chile lowered the monetary policy rate by 400 basis points since July 2023. The headline fiscal balance is estimated to decline to about -2.5 percent of gross domestic product in 2023 due to weaker tax revenues amid an economic slowdown, lower copper prices, and other transitory factors. The 2024 budget envisions a moderate deficit reduction within a medium-term fiscal plan to a broadly balanced fiscal position by 2026. The ongoing implementation of the countercyclical capital buffer will strengthen financial resilience in periods of stress.
Keywords:
basket weight; CPI data; CPI calculation methodology; liability positions vis-à-vis nonresident; money market rate; Fiscal stance; Inflation; Income; Global; Caribbean
Cover FinTech Notes
Capital Flow Management Measures in the Digital Age (2): Design Choices for Central Bank Digital Currency
Mr. Dong He
,
Annamaria Kokenyne
,
Mr. Tommaso Mancini Griffoli
,
Mr. Marcello Miccoli
,
Mr. Thorvardur Tjoervi Olafsson
,
Gabriel Soderberg
, and
Hervé Tourpe
This fintech note looks at how capital flow measures (CFMs) could be implemented with central bank digital currency (CBDC), and what benefits, risks and complexities could arise. There are several implications of the analysis. First, CBDC ecosystems should generally be designed such that they can accommodate the introduction of CFMs. Second, thanks to the programmability of the payment infrastructure given by the new digital technologies, certain CFMs could likely be implemented more efficiently and effectively with CBDC compared to the traditional system. Third, implementing CFMs requires central banks to collaborate on practices and standards. Finally, CFMs on CBDC need to operate alongside traditional CFMs.
Keywords:
Central bank digital currency; Capital flow measures; CBDC implementation; CBDC ecosystem; IMF Fintech Note 2023/009; IMF Library; smart CFMs; fencing CBDC; Central Bank digital currencies; Capital flow management; Capital flows; Foreign assets; Digital wallets; Global
Cover IMF Staff Country Reports
Iceland: Financial Sector Assessment Program-Technical Note on Pension Fund Regulation and Supervision
International Monetary Fund. Monetary and Capital Markets Department
This technical note analyses the key aspects of the regulatory and supervisory regime for pension funds in Iceland. Pension funds in Iceland play a vital role in the domestic financial sector, acting as investors and lenders. This Financial Sector Assessment Program (FSAP) reviews recent developments and the structure of the Icelandic pension fund sector. This technical note provides context on the Icelandic pension system, focusing in particular on the compulsory occupational scheme in Pillar II, the most important pillar of the system. The pension fund sector is large, well developed, and highly interconnected with the domestic financial system, mainly through exposures toward banks and domestic investment funds. A separate technical note summarizes the results of the risk analysis carried out for the pension fund sector and elaborates more on current market risk sensitivities. The governance and internal controls framework for pension funds is not aligned with the systemic role of the sector, and the underlying rules in the Pension Fund Act pre-date the corresponding provisions for other financial sectors. The Financial Supervisory Authority has adopted a risk-based and forward-looking supervisory model, however there is no minimum frequency set for on-site inspections. The FSAP recommends a strengthening of the legislative framework, especially regarding governance, internal controls and outsourcing.
Keywords:
pension fund regulation; finance disclosure regulation; insurance supervisor; staff team of the International Monetary Fund; pension supervisor; Pension spending; Financial stability assessment; Pensions; Internal controls; Pension fund supervision; Europe
Cover IMF Staff Country Reports
People’s Republic of China—Hong Kong Special Administrative Region: 2023 Article IV Consultation Discussions-Press Release; and Staff Report
International Monetary Fund. Asia and Pacific Dept
This 2023 Article IV Consultation discusses that the economic recovery in Hong Kong Special Administrative Region (SAR) stalled in 2022 following a major coronavirus disease 2019 outbreak and U.S. monetary policy tightening. However, in 2023, real gross domestic product is projected to grow by 3.5 percent. The financial system remains resilient and continues to serve as an international financial center, supported by strong institutional frameworks and substantial capital and liquidity buffers. The Linked Exchange Rate System continues to function smoothly, providing a solid anchor to the economy and the financial system, allowing the latter to perform its role as an international financial center. Housing prices, which declined by about 16 percent by end-2022 from the peak in September 2021, have started to recover in early 2023. Near-term risks to the growth outlook are balanced, with systemic risk in the financial sector manageable given significant buffers. A sharper-than-expected global growth slowdown as well as escalation of regional conflicts and resulting disruptions in trade could derail the recovery. A sharp rise in global risk premia amid renewed stress in the global banking system and further tightening of monetary policy in major advanced economies could have adverse spillovers through financial channels.
Keywords:
Hong Kong SAR economy; exchange rate system; rate of HK; GDP compilation; transparency policy; household expenditure survey; Hong Kong SAR authority; Hong Kong SAR official; return on equity; expenditure measure; Housing; External sector statistics; Housing prices; Credit; Global
Cover IMF Staff Country Reports
Kingdom of the Netherlands-Aruba: Technical Assistance Report-Financial Stability Diagnostic and Scoping Mission
International Monetary Fund. Western Hemisphere Dept.
This technical assistance report on Aruba highlights the financial stability diagnostic and scoping mission. The economy of Aruba is tourist dependent, which is an important source of vulnerability. The major source of risk comes from lending. Banks are increasingly exposed to the real estate market and compete with nonregulated lenders. Residential house prices have increased significantly in some regions since the start of the pandemic driven by strong demand from nonresidential buyers as well as higher construction costs due to coronavirus disease-related supply constraints. The future Financial Stability Department (FSD) is advised to develop a strategy on Macroprudential Policy (MaP). Based on the macroprudential strategy, the FSD should prepare the methodology for the introduction of the MaP instruments chosen as well as ensure the necessary preparations in terms of data collection for this purpose. The data available to the Central Bank of Aruba is sufficient for starting systemic risk monitoring, but some data gaps should be addressed. The monitoring of systemic risk and the development of macroprudential tools requires more granular, frequent, and timely data.
Keywords:
CARTAC mission; staff team of the International Monetary Fund; bank FIS; mortgage bank; bank data; c. CBA; lending portfolio; Financial sector stability; Mortgages; Commercial banks; Housing prices; Loans; Caribbean
Cover Policy Papers
The Managing Director's Global Policy Agenda, Spring Meetings 2023: Safeguard Economic Stability, Support Vulnerable Countries, Sustain Our Future Prosperity
International Monetary Fund
The global economy is at another highly uncertain moment: tentative signs of stabilization earlier this year have receded, and the outlook is increasingly risky and uncertain. At the same time, divisions within and across countries are deepening, exacerbated by rising fragmentation. Strong policy action is needed together with pragmatic approaches to find areas of common ground to respond to shared challenges. The IMF is proactively engaging with our members to chart a clear course to a stronger and more sustainable path for the global economy.
Keywords:
support vulnerable country; Policy agenda; spring meetings 2023; future prosperity; vulnerable country; Financial sector stability; Climate change; Inflation; Global