Statement by IMF Staff Representative
Author: International Monetary Fund
Publication Date:
05 Jun 2006
eISBN:
9781451839340
Language:
English
Keywords:
ISCR; CR; reform; interest expenditure; payout of insured deposit; yield to maturity; COFAC's assets; financing program; Public sector
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Strong economic policies and a supportive external environment have contributed to rapid growth, low inflation, strengthened external position, and an improved debt structure helping Uruguay perform well under the Stand-By Arrangement. Executive Directors commended the fiscal and monetary polices and urged to maintain exchange rate flexibility. They emphasized that restructuring of public banks would contain contingent fiscal liabilities. They appreciated the efforts to strengthen tax administration, and agreed that continued strong macroeconomic polices and progress with structural reforms will raise Uruguay’s growth prospects.

Abstract

Strong economic policies and a supportive external environment have contributed to rapid growth, low inflation, strengthened external position, and an improved debt structure helping Uruguay perform well under the Stand-By Arrangement. Executive Directors commended the fiscal and monetary polices and urged to maintain exchange rate flexibility. They emphasized that restructuring of public banks would contain contingent fiscal liabilities. They appreciated the efforts to strengthen tax administration, and agreed that continued strong macroeconomic polices and progress with structural reforms will raise Uruguay’s growth prospects.

Since the issuance of the staff report, the following additional information has become available. It does not alter the thrust of the staff appraisal.

1. Prior action. The tax reform was submitted to congress on March 16, 2006, and is in line with the earlier draft discussed in the staff report.

2. Performance Criteria. Final data confirm that all end–December 2005 quantitative performance criteria have been observed (Table 1), with the primary surplus of the combined public sector now amounting to 3.9 percent of GDP.

3. Economic growth. Preliminary figures just released show real GDP growth in 2005 at 6.6 percent, which was led by strong exports and private consumption. This outcome is well above the 6 percent growth rate envisaged in the program.

4. Market borrowing. On March 16, Uruguay issued another US$500 million bond, completing 80 percent of the 2006 external market financing program. This 30–year bond was issued at a yield to maturity of 7.6 percent, with twice the duration and a lower spread than the January 24 one.

5. Resolution of the COFAC credit cooperative. Reforms have progressed as envisaged. The payout of insured deposits is being completed, and an agreement was signed for the Venezuelan Development Bank Bandes to purchase US$10 million of COFAC’s assets and liabilities to establish a new well–capitalized financial institution.

Table 1.

Uruguay: Quantitative Performance Criteria and Indicative Targets for the 2005 Program 1/

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PC= performance criterion; IT=Indicative target.Sources: Ministry of Economy and Finance; and Central Bank of Uruguay.
1/

As defined in the Technical Memorandum of Understanding of September 14, 2005.

2/

Cumulative changes from end–December of the previous calendar year.

3/

All maturities.

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Cover IMF Staff Country Reports
Uruguay: Third Review Under the Stand-By Arrangement and Request for Modification and Waiver of Nonobservance of Performance Criteria: Staff Report; Staff Statement; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Uruguay
Author: International Monetary Fund
Volume/Issue:
Volume 2006: Issue 197
Publisher:
International Monetary Fund
ISBN:
9781451839340
ISSN:
1934-7685
Pages:
66
DOI:
https://doi.org/10.5089/9781451839340.002