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Peru: Staff Report for the 2017 Article IV Consultation—Informational Annex

Author(s):
International Monetary Fund. Western Hemisphere Dept.
Published Date:
June 2017
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Fund Relations

(As of April 30, 2017)

Membership Status: Joined 12/31/1945; accepted the obligations of Article VIII, Sections 2(a), 3, and 4 on 2/15/1961.

General Resources Account:SDR MillionPercent of Quota
Quota1334.50100.00
Fund holdings of currency1304.1797.73
Reserve Tranche Position30.382.28
SDR Department:SDR MillionPercent of Allocation
Net cumulative allocation609.89100.00
Holdings531.1587.09

Outstanding Purchases and Loans: None

Latest Financial Arrangements:

TypeDate of ArrangementExpirationAmount Approved Date (SDR Million)Amount Drawn (SDR Million)
Stand-ByJan. 26, 2007Feb. 28, 2009172.370.00
Stand-ByJun. 09, 2004Aug. 16, 2006287.280.00
Stand-ByFeb. 01, 2002Feb. 29, 2004255.000.00

Projected Payments to Fund1

(SDR Million; based on existing use of resources and present holdings of SDRs):

Forthcoming
20172018201920202021
Principal0.000.000.000.000.00
Charges/Interest0.260.390.390.390.39
Total0.260.390.390.390.39
1 When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.
1 When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

Exchange Arrangements

Peru maintains a unified, floating exchange rate. On December 29, 2016, the average of interbank buying and selling rates was 3.35 soles per U.S. dollar. The exchange system is free of restrictions, except for those maintained solely for the preservation of national or international security, and which have been notified to the Fund pursuant to Executive Board Decision No. 144-(52/51).

Last Article IV Consultation

The 2016 Article IV consultation was concluded on June 20, 2016 (IMF Country Report No. 16/234).

FSAP and ROSCs

Several joint Fund-Bank missions visited Lima in the period September 2000-January 2001 to conduct an FSAP for Peru. The corresponding Financial System Stability Assessment (FSSA) report was discussed by the Executive Board on March 12, 2001. A follow-up FSAP mission was concluded in February 2005. More recently, the Executive Board, on April 20, 2011, took note of the staff’s analysis and recommendations in the report on Peru’s FSAP-Update. In October 2002, an FAD mission conducted a Fiscal ROSC for Peru (IMF Country Report No. 04/109, 4/16/04), while an STA mission conducted a Data ROSC for Peru in February 2003 (IMF Country Report No. 03/332, 10/24/03).

Technical Assistance
DepartmentPurpose
FADMedium Term Budgeting
Treasury management
Macro-fiscal framework and fiscal rules
Tax policy and administration
Fiscal Transparency Evaluation
General Tax Policy
MCMDeveloping fixed income swap markets
LEGRisk based supervision of securities markets
STAHousing Price Indexes
Monetary and Financial Sector Statistics

World Bank Relations

(As of May 2, 2017)

A. Bank Group Strategy

The World Bank Group support to Peru is defined in the FY17–FY21 Country Partnership Framework (CPF) discussed by the Board on May 2, 2017. The Peru CPF is fully aligned with the goals of Government of Peru National Plan for 2016–2021. It was developed in consultation with the Peruvian authorities and a wide range of key stakeholders at the national and local levels and builds on the lessons-learned from the previous CPS and its evaluation. The CPF is structured across three pillars: (i) Productivity for growth; (ii) Services for citizens across the territory; and (iii) Natural resource and climate risk management. Since the common challenge in these three pillars is implementation, effectiveness of public action and spending will be a crosscutting issue. Gender and indigenous disparities will be streamlined into all interventions to the extent possible.

The CPF’s five-year implementation period (FY17–FY21) is fully aligned with Peru’s political cycle. The WBG will work in close coordination to deliver an integrated package of financial products, guarantees and knowledge services based on relative comparative advantages and the strengths of the WBG’s programs in Peru. The CPF builds on this engagement and focuses increasingly on the institutional challenges Peru faces, while highlighting the opportunity to crowd-in private sector investment and sharing Peru’s globally recognized successes.

The WB portfolio includes 15 investment projects and a GEF grant totaling US$960 million. In addition, Peru has access to four contingent lines of credit for US$3 billion, including two DPF–DDOs and two Catastrophe Deferred Drawdown Option (CAT–DDO). The indicative WB financing for FY17–FY18 is around US$500 million (which will be focused exclusively towards IPF projects). WB lending volumes over the FY19–FY21 period are tentative at this stage and will depend on country demand and overall progress in the course of the CPF period.

B. Bank-Fund Collaboration in Specific Areas

OECD. Peru has formally declared its intention to join the OECD by 2021. The WBG has provided advisory support to the OECD engagement. Accompanying the OECD Country Program, the WB delivered a strategy on OECD engagement and provided support in the adoption of OECD instruments, standards or action plans for reform. In particular, technical input to improve statistics, environmental standards, integrity in the public sector, international taxation and innovation.

Public Private Partnerships to infrastructure. The WB will continue working in a closely coordinated manner in two areas to: (i) help strengthen the institutional framework to distribute risks and returns so that new investment does not impose excessive fiscal pressures (while strongly safeguarding environmental and social standards); and (ii) support the development of the domestic capital markets to lengthen maturities and reduce costs by expanding the number of domestic and international capital market and commercial financing available for the country. Public Expenditure DPF-DDO and technical assistance will be used to continue providing support, which might be aided with guarantee instruments to help private players manage risks that are devolved to them.

Development of the capital markets in Peru. The WB ongoing program will continue supporting the development of capital markets and infrastructure finance through the National Development Bank (Corporación Financiera de Desarrollo, COFIDE).

Peru: World Bank Portfolio Status As of April 30, 2017 (In millions of U.S. dollars)
Active ProjectsOriginal Amount in US$ MillionsDifference Expected and Actual Disbursements a/
Project IDProject NameFiscal YearIBRDIDAGrantsCancel.Undisb.Orig.Frm Rev’d
P156250Peru Innovation2017450.00.045.00.30.0
P147342PE Enhancement of Env. Quality Services2017400.00.040.00.00.0
P155902PE Fisheries and Aquaculture Innovation2017400.00.040.00.10.0
P156858PE Boost. Hum. Cap. and Productivity DPL20161,2500.00.01,250.00.00.0
P154981Pub. Exp. and Fiscal Risk Mgmt DPL-DDO20161,2500.00.01,250.00.00.0
P145610PE Lima Metro Line 2 Project20163000.00.0260.097.50.0
P132515PE Support to the Subnational Transport2016500.00.050.08.80.0
P149831PE CAT DDO II20154000.00.0400.00.00.0
P132505PE Cuzco Transport Improvement20141200.00.0118.628.612.7
P131013PE National Ag. Innovation Program2014400.00.034.212.20.0
P117318PE Cuzco Regional Development2014350.00.034.029.020.6
P123151PE Basic Education *2013250.00.08.30.71.5
P122194PE HIGHER EDUCATION QUALITY IMPROVEMENT *2013250.00.012.17.35.6
P131029PE Social Inclusion TAL *2013100.00.01.31.30.0
P117293PE Optimization of Lima Wat & Sewerage2011109.50.00.056.3−53.233.3
P120860Peru CAT DDO20111000.00.0100.00.00.0
P117864PE Second Rural Electrification *2011500.00.05.70.01.1
P117310PE Results Nutrition for Juntos SWAp *2011250.00.01.71.70.0
P079165PE Sierra Rural Development Project *2007400.00.20.0−19.80.0
P129647PE (GEF) Strengthening Sust Mgmt Guano Islands201408.90.04.91.30.0
Overall Result3,954.50.08.90.23,712.1115.775.0
International Financial Corporation Portfolio As of April 30, 2017 (In millions of U.S. dollars)
CommitmentInstitutionLNLNETQL + QEGTRMALLALLLNETQL + QEGTRMALLALL
Fiscal YearShort NameCmtd - IFC Repayment - IFCCmtd - IFCCmtd - IFCCmtd - IFCCmtd - IFCCmtd - IFCCmtd - PartOut - IFCOut - IFCOut - IFCOut - IFCOut - IFCOut - IFCOut - Part
2013/ 2015APMTC51.85.87.559.2188.551.82.954.7188.5
2011Arequipa Region0.60.60.60.6
2013/ 2007/ 2011/ 2008B.Continental BPZR25.779.99.925.7 9.925.79.925.7 9.9
2016BTST2.02.02.02.0
2009/ 2010/ 2013/ 2014/ 2007/ 2011/ 2016/ 2012BanBif15.015.037.915.067.915.037.915.067.9
2015/ 2016Banco Financiero27.127.127.127.1
2009/ 2007/ 2004Cartones America0.20.2
2015/ 2012Compartamos Peru4.37.54.34.34.3
2010Enfoca10.410.410.010.0
2009/ 2014/ 2011F. Confianza14.89.112.026.814.812.026.8
2015HMC Capital10.510.52.82.8
2015La Positiva Gen18.018.018.018.0
2007/ 2000Laredo3.824.20.84.53.80.34.0
2007Lima JCIAirport16.816.813.413.4
2006/ 2007/ 2016/ 2002/ 2008/ 2012MIBANCOPERU54.642.27.061.60.054.67.061.6
2014PEIP21.821.87.77.7
2008Peru LNG222.977.1222.9222.9222.9
2015Tinka1.81.81.81.8
2001/ 2012UPC26.67.126.626.626.6
2000/ 1995/ 1994Yanacocha12.00.30.30.30.3
Total Portfolio419.5279.9113.534.942.78.5619.2188.5419.588.034.942.73.2588.3188.5

Relations with the Inter-American Development Bank

(As of April 30, 2017)

A. Country Strategy

The new Country Strategy with Peru covers the period 2017–2021. The strategy intends to work on three main areas: (i) productivity, with an emphasis on the labor market, business climate, business development, and infrastructure; (ii) institutional strengthening and basic service delivery, with an emphasis on public management, health, and citizen security; and (ii) environmental sustainability and climate change, with an emphasis on water resources, environmental management, and agribusiness. The proposed actions are aligned with the Peruvian government plan, which prioritizes (i) boosting and formalizing the economy; (ii) strengthening public management; (iii) improving the delivery of services to the population; and (iv) reinforcing environmental management.

The Country Strategy was approved by the Board of Directors on May 2017. The Bank has worked with the government on a multi-sector and multi-annual approach of articulated interventions addressing, in a coordinated fashion, various development gaps at the same time. Also, the Bank’s intention is to diversify the instruments of support to the country. Innovation in instruments include service contracts with the government in priority areas (“fee for services”), larger private sector operations, and extended use of knowledge sharing and technical cooperation. An approval scenario of US$1,500 million is estimated. Disbursements with sovereign guarantee are estimated at US$1,250 million.

B. Lending

As of April 2017, the Bank’s portfolio of active, public sector operations consisted of 22 loans for a total amount of US$1,266 million, including one policy-based loans with a deferred disbursement modality for a total amount of US$300 million. The rest of the active portfolio consists of 21 loans for an amount of US$966 million, of which US$347.6 million (27 percent) have been disbursed. The public sector lending program for 2016 comprised two operations for a total of US$120 million. The public sector lending program for 2017 comprises seven investment loans for a total amount of US$400 million.

Regarding private sector lending, as of March 2017 the Inter-American Investment Corporation (IIC), member of the IDB Group, has an active portfolio of 23 operations for a total approved amount of US$904.9 million and a total net exposure of US$621.18 million. The IIC’s active portfolio exposure is distributed in the following sectors: Oil and Gas, 44 percent; Energy, 25 percent; Financial Intermediaries, 19 percent; Agribusiness, 6 percent; Education, 5 percent; and others, 1 percent.

Peru: IDB Sovereign Guaranteed Loan Portfolio by SectorAs of April, 2017 (In millions of U.S. dollars)
SectorCommitmentsDisbursements% Disbursed
Agriculture95.04.24
Science, Technology and Competitiveness7526.435
Social Investment355.022.06
Modernization of the State102.575.273
Integration and Trade2000
Water and Sanitation115.055.248
Transportation503.9164.533
Total1,266.6347.527

Statistical Issues

General. Macroeconomic statistics are broadly adequate for policy formulation, surveillance, and monitoring. Peru subscribes to the Special Data Dissemination Standard (SDDS). A data ROSC was prepared and published in 2003.

Despite progress in recent years, there is scope for improvement in the following areas:

(i) coordination among the agencies that compile official statistics to avoid duplication of efforts; (ii) expanding the coverage of the wholesale price index to include mining, oil and gas extraction, electricity and water, public transportation, and communication; (iii) finalizing the migration to the standardized report forms for monetary data with the introduction of report forms for the central bank, other depository corporations, and other financial corporations; and (iv) expanding the scope of data sources for compiling financial flows of individual residents.

National accounts. In 2014, the National Statistics Office (INEI) released a new national account series implementing the 1993 SNA and using 2007 as the base year.

Price statistics. At the present time, the official measure of inflation for Peru is the CPI for Metropolitan Lima, compiled and published by INEI. Starting in January 2010, the Metropolitan Lima CPI has been compiled using updated weights based on the 2008/09 Encuesta Nacional de Presupuestos Familiares (ENAPREF). Since January 2011, city level indices have been compiled and disseminated for the 24 departmental capitals and another large urban area using weights from the 2008/09 ENAPREF and a methodology matching that employed for the Metropolitan Lima CPI. A new law issued in 2009 requires the INEI to compile a new national level CPI that will serve as the official CPI for Peru in the future. An STA mission on the CPI was conducted in May 2–13, 2011 to evaluate the methodology of the new national CPI index. The new national level CPI, starting with the January 2012 index, was disseminated since February 2012 (the WPI). Statistical techniques used to compile the index generally follow international standards and the base year for the calculation of the weights is 2013.

Labor market statistics. The authorities monitor labor market developments using four indicators: open unemployment, underemployment, employment, and remunerations. While monthly unemployment, employment and income data for metropolitan area of Lima from INEI are timely, only urban employment indexes are available from the Ministry of Labor for other areas and with some delays; monthly remuneration data for the government are timely but the monthly remuneration data for the private sector are no longer available. The nationwide unemployment and underemployment situation is surveyed quarterly, and INEI is now publishing a broader regional coverage of the labor market statistics based on the Encuesta Nacional de Hogares (ENAHO). It would be useful to develop competitiveness indicators such as productivity and unit labor cost indexes.

Government financial statistics. The Central Bank (BCRP) compiles government finance statistics (GFS) following the GFSM2001, for the general government and its subsectors. Data for all subsectors are reported on a cash basis for revenues and on accrual basis for expenditures, and financial assets and liabilities are reported at face value. The authorities have not yet sent to the Fund information on the components of expenditures by function. The coverage of published national budget data is narrower than the fiscal statistics prepared for the combined public sector. The authorities report data for publication in the Government Finance Statistics Yearbook (GFSY) using the GFSM 2001. No high frequency data is published in the International Financial Statistics (IFS), but is available from the weekly report of the BCRP.

Monetary statistics. The BCRP compiles and publishes the analytical accounts of the central bank, depository corporations, and financial corporations broadly in line with the methodology recommended by the Monetary and Financial Statistics Manual. The main divergences are the exclusion of the deposits of other financial corporations, state and local governments, and public nonfinancial corporations from the definition of broad money; and valuation of some financial assets held to maturity at cost rather than at market prices or at the lower of cost or market price for investment securities. At the request of the authorities, a mission visited the country in January 2007 to assist with the migration to the new standardized report forms (SRFs) for reporting monetary data to the IMF. The mission finalized the SRF for the central bank, recommending improvements in the classification and sectorization of some accounts. A follow-up mission took place in September 2008. The mission completed the work on the SRF for the central bank and developed a bridge table linking the source data reported by banks to the BCRP to the report form 2SR (other depository corporations). The mission identified shortcomings in the management of the database that generate the accounts of the other depository corporations sector at the BCRP. After the completion of the two technical assistant missions the BCRP sent a first version of the SRFs in October 2016. The IMF is reviewing them prior to publication and a follow up technical assistance mission is scheduled in 2017.

Financial soundness indicators. Peru started reporting data and metadata for financial soundness indicators (FSIs) with a quarterly frequency in June 2011.

External sector statistics. The BCRP prepares quarterly data on the balance of payments and international investment position largely in line with the recommendations of the fifth edition of the Balance of Payments Manual (BPM5). Data are reported to the Fund for publication in the IFS and the Balance of Payments Statistics Yearbook. Departures from BPM5 include the lack of coverage of assets held abroad and land acquisition abroad by residents; and not recording on an accrual basis some external debt transactions.

The BCRP has been reporting since August 2001 weekly data on international reserves in accordance with the Operational Guidelines for Data Template on International Reserves and Foreign Currency Liquidity. Since August 2006, the BCRP is including the full amount of the liquidity requirements in the reserve template both under official reserve assets and as a contingent net drain (as specified in Section III of the Data Template). Peru disseminates quarterly data on external debt with an eight week lag on the National Summary Data Page with a hyperlink to the Fund’s website.

Peru: Table of Common Indicators Required for Surveillance(As of April 30, 2017)
Date of Latest ObservationDate ReceivedFrequency of data7Frequency of Reporting7Frequency of Publication7Memo Items:
Data Quality – Methodological Soundness8Data Quality Accuracy and Reliability9
Exchange Rates04/27/1704/28/17DMD
International Reserve Assets and Reserve Liabilities of the Monetary Authorities102/28/1703/31/17DMW
Reserve/Base Money02/28/1703/31/17WMWO, LO, LO, LOO, O, O, O, O
Broad Money02/28/1703/31/17WMW
Central Bank Balance Sheet02/28/1703/31/17WMW
Consolidated Balance Sheet of the Banking System02/28/1703/31/17WMW
Interest Rates202/28/1703/31/17DMD
Consumer Price Index02/28/1703/31/17MMMO, LO, LO, LOLO, LO, O, O, O
Revenue, Expenditure, Balance and Composition of Financing3 – CG and GG4Q4 201603/17/17QQQO, LO, O, OO, O, O, LO, O
Stocks of CG Debt5Q4 201603/17/17QQQ
International Investment Position6Q4 201603/17/17QQQ
External Current Account BalanceQ4 201603/17/17QQQO, LO, LO, LOLO, LO, O, O, O
Exports and Imports of Goods and ServicesM2 201704/30/17MMM
GDP/GNPQ4 201603/17/17QQQLO, LO, LO, LOLNO, LNO, LNO, LO, LO
Gross External DebtQ4 201603/17/17QQQ

Every Friday the central bank disseminates daily net international reserves, and weekly International Reserve Assets and Reserve Liabilities.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Central government (CG) and general government (GG) revenue and expenditure data are available monthly; and the composition of financing are available quarterly. Financing comprises of foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including type of instrument, maturity and type of creditor.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A); Irregular (I); Not Available (NA).

Reflects the assessment provided in the data ROSC published in October 2003 and based on the findings of the mission that took place during February 12–26, 2003 for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning (respectively) concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O), largely observed (LO), largely not observed (LNO), not observed (NO), or not available (NA).

Same as footnote 7, except referring to international standards concerning (respectively) source data, statistical techniques, assessment and validation of source data, assessment and validation of intermediate data and statistical outputs, and revision studies.

Every Friday the central bank disseminates daily net international reserves, and weekly International Reserve Assets and Reserve Liabilities.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Central government (CG) and general government (GG) revenue and expenditure data are available monthly; and the composition of financing are available quarterly. Financing comprises of foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including type of instrument, maturity and type of creditor.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A); Irregular (I); Not Available (NA).

Reflects the assessment provided in the data ROSC published in October 2003 and based on the findings of the mission that took place during February 12–26, 2003 for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning (respectively) concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O), largely observed (LO), largely not observed (LNO), not observed (NO), or not available (NA).

Same as footnote 7, except referring to international standards concerning (respectively) source data, statistical techniques, assessment and validation of source data, assessment and validation of intermediate data and statistical outputs, and revision studies.

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