Fifth and Sixth Reviews Under the Stand-By Arrangement, Requests for Waiver of Nonobservance of Performance Criteria, and Financing Assurances Review: Staff Report; Staff Supplement; Staff Statement; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Uruguay

This paper discusses key findings of the Fifth and Sixth Reviews Under the Stand-By Arrangement (SBA) for Uruguay. Monetary and fiscal policies have been implemented as envisaged in the program. All quantitative performance criteria were met through end-September, except for the ceiling on public debt. In structural area, there was progress in financial sector reforms and, most importantly, the long-awaited tax reform is expected to be passed by Congress by the time of Board consideration of the reviews. However, the effort to secure tax reform delayed legislative initiatives in other areas.


This paper discusses key findings of the Fifth and Sixth Reviews Under the Stand-By Arrangement (SBA) for Uruguay. Monetary and fiscal policies have been implemented as envisaged in the program. All quantitative performance criteria were met through end-September, except for the ceiling on public debt. In structural area, there was progress in financial sector reforms and, most importantly, the long-awaited tax reform is expected to be passed by Congress by the time of Board consideration of the reviews. However, the effort to secure tax reform delayed legislative initiatives in other areas.

I. An Overview of Progress under the Stand-By Arrangements

A positive external environment and sound policies have yielded strong macroeconomic results, paving the way for an early exit from Fund financial support. Despite significant progress, challenges remain, particularly in the structural area.

1. Macroeconomic outcomes. Uruguay’s recovery from the crisis of 2002 has exceeded all expectations (Figure 1).

Figure 1.
Figure 1.

Program Achievements

Citation: IMF Staff Country Reports 2007, 146; 10.5089/9781451839395.002.A001

Sources: Central Bank of Uruguay, Ministry of Finance; and Fund staff estimates and projections.
  • Output and inflation. Following a drop of 11 percent in 2002, sustained growth has brought GDP in 2006 to 15 percent above the pre-crisis level, and the unemployment rate near a historical low. Inflation has declined from 26 percent in 2002 to about 6 percent in 2006. Still, while poverty has fallen, it remains above pre-crisis levels.

Uruguay: Economic Recovery

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  • External position. Despite a sizable recovery in imports, including FDI-related imports, vigorous export growth has contained the current account deficit. With strong access to capital markets, net international reserves are now about US$1 billion above the level envisaged for 2008 (i.e. at the end of the program). Even after having repaid all Fund obligations, reserve coverage of short-term debt and dollar-denominated deposits is higher than programmed under both arrangements. Sovereign spreads have declined to a historical low. For the second time since 2002, Standard and Poor’s has upgraded Uruguay’s long-term foreign and local currency sovereign credit ratings (to B+).


Despite global market volatility in mid-2006, Uruguay’s sovereign spreads remain low by historical standards.

Citation: IMF Staff Country Reports 2007, 146; 10.5089/9781451839395.002.A001

2. Macroeconomic policies. These positive outcomes have been supported by a strong macroeconomic policy stance:

  • Monetary policy. Monetary restraint has been instrumental in consolidating inflation and inflation expectations at mid-single digits. A flexible exchange rate regime adopted in mid-2002 has helped the economy adjust to shocks. Faced with large private capital inflows in late 2005 and early 2006, the central bank intervened in the foreign exchange market to build up reserves and slow down peso appreciation, while supporting the remonetization of the economy.

  • Fiscal policy. The primary surplus has progressively been raised towards its medium-term target of 4 percent of GDP, and the overall deficit is well below projections. This achievement was made possible by the economic rebound, stronger tax administration, prudent expenditure policies, and lower interest costs. At the same time, to address the social dislocation from the 2002 crisis, the budget made space for a two-year Social Emergency Program.


The amortization profile has significantly improved with advanced repurchases to the Fund and debt swaps.

Citation: IMF Staff Country Reports 2007, 146; 10.5089/9781451839395.002.A001

  • Debt management. The net present value of public debt declined and its structure improved after the 2003 debt exchange. Further fundamental improvements have taken place since then. Vigorous growth, the strengthened fiscal position, and currency appreciation have lowered the debt-to-GDP ratio from above 100 to 65 percent. Recently, taking advantage of strong market access and sharply lower spreads, the authorities have improved the debt profile by using long-term bond issues to repay short-term, floating rate or more expensive debts. This includes the full repayment of all remaining Fund obligations (SDR 726 million) in November. Also, the government increased issuance of inflation-indexed bonds and swapped US$1.1 billion in amortization payments due mostly in 2011 and 2015 into longer maturity bonds. As a result, the average maturity of public debt has risen from about 7 years at end-2004 to 11 ½ years in November 2006.

  • Financial system. Financial soundness indicators are substantially above 2002 levels. Non-resident deposits, which proved volatile in the face of external developments, have dropped to 20 percent of total deposits and nonperforming loans have fallen to 2 percent of total loans (excluding the housing bank). Vulnerabilities have also been reduced by banks’ high liquidity, which, together with central bank reserves, cover almost 80 percent of short-term debt and foreign currency deposits. Resident deposits have recovered to about 85 percent of pre-crisis level.

3. Structural reforms. Important progress has been achieved in several areas, often with Fund technical cooperation. A new public debt management office has led the strategy for regaining market access, permitting early repayment of all Fund financing. On the fiscal side, Congress approved in late 2005 a five-year budget with a medium-term primary surplus target of 4 percent of GDP and, is expected shortly to pass a comprehensive tax reform, which introduces a personal income tax, and streamlines and eliminates minor taxes; tax administration has also been significantly strengthened. In the financial sector, prudential norms were tightened to internalize risks from high dollarization and exposure to regional contagion, the supervisory framework was strengthened, and a deposit insurance scheme was introduced. Nuevo Banco Comercial, the bank formed with performing assets of three failed banks, was privatized this year. A bankruptcy framework is being discussed in Congress.

4. Delays. All this is not to suggest that adherence to the program’s timetable for structural reforms has been flawless. Indeed, in many areas, there were delays, reflecting the fact that the reform agenda was ambitious and front-loaded, and required more time to gather the necessary political consensus. Thus, for example, congressional approval of the tax reform has taken longer than envisaged. The effort to secure passage of the tax reform, in turn, led to delays and changes in the sequencing of other reforms, including the submission/approval of specialized pension funds reforms, and the financial sector law aimed at enhancing central bank independence. Also, reflecting difficult negotiations with unions, the restructuring of the housing bank (BHU) has moved slower than envisaged.

5. Vulnerabilities. While significantly reduced, vulnerabilities remain (Figure 2). The public debt ratio is still high and projected to decline below 50 percent only in 2011, and the debt is denominated in U.S. dollars. The financial system too is highly dollarized (85 percent of deposits), with a large share in sight deposits, and currency mismatches in the corporate sector expose banks to exchange rate risk. While bank liquidity is an important buffer, international reserves are not as high as in other dollarized economies.

Figure 2.
Figure 2.

Vulnerability Indicators

Citation: IMF Staff Country Reports 2007, 146; 10.5089/9781451839395.002.A001

Sources: Central Bank of Uruguay; Ministry of Economy and Finance; and Fund staff estimates.

II. Recent Developments

Macroeconomic outcomes and policies continue to be very strong and, despite delays, progress also has been made in key structural reforms.

6. Macroeconomic developments. Economic performance remains positive:

  • Growth. GDP growth of 8½ percent during the first semester (year-on-year) exceeded expectations, and led to a sharp drop in unemployment (Figure 3). Domestic demand has taken over as the main driver of growth. In recent months, however, growth in industrial production and capital good imports have decelerated.

  • Inflation. Annual inflation was 6.2 percent in November, within the central bank’s target range of 4½-6½ percent. Inflation expectations for end-2007 are at 6 percent.

Figure 3.
Figure 3.

The Economic Recovery

Citation: IMF Staff Country Reports 2007, 146; 10.5089/9781451839395.002.A001

Source: Central Bank of Uruguay; Instituto Nacional de Estadisticas (INE) and Fund staff estimates.

Inflation is stabilizing at the upper half of the band.

Citation: IMF Staff Country Reports 2007, 146; 10.5089/9781451839395.002.A001


The M1 growth target is projected to decline,…

Citation: IMF Staff Country Reports 2007, 146; 10.5089/9781451839395.002.A001

7. Macroeconomic management. The policy framework has evolved as anticipated under the program.

  • Monetary and exchange rate policy. Despite evidence of rapid monetization, inflation pressures early in the year prompted the authorities to slow down the growth of monetary aggregates. The annual growth of base money declined from 31 percent in April to 22 percent in November. In October, the central bank confirmed the reduction of the one-year-ahead M1 growth rate target to 18 percent, down from 22 percent for end-2006, and extended the inflation target range of 4½-6½ percent through March 2008. The central bank has limited intervention in the foreign exchange market as private capital inflows have moderated—thus reducing sterilization costs and pressures on monetary aggregates. However, purchases by the government to cover its foreign exchange needs continue to influence the exchange rate. Net international reserves have increased significantly, reflecting government access to global capital markets.


…and the central bank has limited intervention in the foreign exchange market.

Citation: IMF Staff Country Reports 2007, 146; 10.5089/9781451839395.002.A001

  • Fiscal performance. The primary surplus reached 3.4 percent of GDP (annualized) in the first three quarters of 2006, exceeding the program target by about 0.3 percent of GDP. Weak financial performance of public enterprises—caused largely by the costs of a drought—was more than offset by stronger revenue collection and lower spending.

Fiscal performance in the first three quarters has been strong, despite weaker public enterprise outturns.

2006 Fiscal Performance

(as percent of GDP)

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8. Structural reforms. Important progress has been achieved in several areas since the last review. In addition to the expected approval of the all important tax reform before Congress breaks for recess in mid-December, the authorities completed and began implementing reform plans of the budget process, customs, and the social security bank.

While there have been delays, structural reforms have been progressing.

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Moreover, a budget office is already operating in the ministry of finance. The government established a private sector relations office and submitted to Congress a bankruptcy law. Also, despite delays, progress is being made toward completing the restructuring of the housing bank (BHU). The government has started negotiations on a Trade and Investment Framework Agreement with the United States.

III. Policy Framework for 2007

Given the planned cancellation of the stand-by arrangement, discussions focused on plans for entrenching macroeconomic stability and advancing the structural agenda.

9. Outlook. The authorities stressed that they will continue to pursue the objectives of their economic program, including sound macroeconomic policies and structural reform, so as to further reduce vulnerabilities and improve social conditions. Growth is expected to slow down to 4.2 percent in 2007, broadly in line with the consensus forecast and significantly above the historical rate of around 2 percent. The risks of overheating are limited (Figure 4). Core inflation is easing, strong investment is lifting potential output, lending remains near the post crisis’ low, and a widening of the trade deficit reflects increased FDI-related imports and a deterioration in the terms of trade. Moreover, the real effective exchange rate appears to be near its long-run equilibrium (Country Report No. 06/425). Medium-term prospects remain positive and broadly in line with the previous review. The announcement of new investment, including of a third pulp mill, suggests upside potential for growth, but continued opposition in Argentina to the construction of the two other major pulp mills poses downside risks.

Figure 4.
Figure 4.

Overheating - Are there any signs?

Citation: IMF Staff Country Reports 2007, 146; 10.5089/9781451839395.002.A001

Source: Central Bank of Uruguay; and Fund staff estimates.

The medium-term macroeconomic outlook remains broadly in line with earlier projections.

Uruguay: Medium-term Macroeconomic Framework

(Percent of GDP, unless otherwise indicated)

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Sources: Uruguayan authorities; and Fund staff estimates.

A. Monetary and Exchange Rate Policies

10. Inflation. Following the pick up in inflation in early 2006 (reflecting demand growth, higher oil prices, and drought), price pressures have abated. With annual inflation running at 6.2 percent, inflation has begun to move closer to the center of the target range. Underlying inflation as measured by principal components and core inflation (i.e. excluding food and regulated prices) is within the target range and has started to decline.


Underlying inflation is well within the band.

(In percent a year)

Citation: IMF Staff Country Reports 2007, 146; 10.5089/9781451839395.002.A001

1/ with a higher weight to the more persistent components in the CPI.2/ excluding all regulated prices (including oil), fruits and vegetables.

11. Monetary tightening. With underlying inflation rising earlier in the year, and given the relatively high inflation inertia, the tightening of monetary policy is appropriate. Balancing the need to contain potential inflation pressures, while continuing to support remonetization, the annual M1 growth target for September 2007 was lowered to 18 percent, and a further decline to 12 percent is expected by end-2007. The staff noted that an earlier reduction in money growth would facilitate meeting the end-2007 target. The authorities reiterated their readiness to tighten monetary conditions should inflation pressures reemerge.

12. Reserves. With strong capital market access, Uruguay has exceeded the net international reserves targets by wide margins. Even so, given the still relatively low reserve coverage of short-term debt and foreign exchange deposits compared to other dollarized economies, the authorities concurred that much of the overperformance to date should be locked in or used to further reduce debt vulnerabilities. They aim to accumulate additional reserves in 2007, mainly through long-term international capital market borrowing, while continuing to purchase foreign exchange opportunistically, consistent with the inflation objective and maintaining exchange rate flexibility.

B. Fiscal Policies and Reforms

13. 2007 budget. The revised 2007 budget reaffirms the government’s commitment to the program’s medium-term primary surplus target of 4 percent of GDP. This balances the objectives of addressing spending needs and reducing the still high public debt, and is also consistent with a broadly neutral fiscal stance (near zero fiscal impulse). As envisaged, this target will be monitored on a modified cash basis (i.e. adjusted for planned cuts in arrears and floating debt). The headline outcome also could be lower to the extent that infrastructure investments financed by privatization proceeds move forward (about 0.2 percent of GDP). Also, transferring the housing policy from BHU to the government (about 0.2 percent of GDP) would lower the headline figure, but not imply additional spending for the public sector as a whole. If all of these adjustments materialize, the primary balance would remain broadly unchanged in 2007 relative to 2006.

The revised 2007 budget remains consistent with a primary surplus of 4 percent of GDP, and assumes a sharp recovery in public enterprise performance with respect to 2006.

2007 Revised Budget

(as a percent of GDP)

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2006 on a cash basis; 2007 on a modified cash basis.


The fiscal impulse is projected to be eliminated in 2007.

Citation: IMF Staff Country Reports 2007, 146; 10.5089/9781451839395.002.A001

Even with adjustments, the primary balance remains broadly unchanged in 2007.

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14. Fiscal projections. Discussions focused on the feasibility of achieving the primary balance objective, in light of the ambitious increase in revenues. The authorities considered that with progress in tax administration, their revenue projections were well within reach. They stressed that the improvement in public enterprise performance reflected a recovery from an unusually severe drought in 2005-06, and planned adjustments in electricity tariffs in January to reflect higher costs. Should revenues fall short, the authorities reaffirmed their readiness to use contingency measures, including administrative caps on non-essential spending, consistent with the budget law, after reconsidering spending priorities.


The drought in 2006 led to an increase in the use of expensive electricity sources.

Composition of Electricity Generation

Citation: IMF Staff Country Reports 2007, 146; 10.5089/9781451839395.002.A001

15. Tax reform. The law preserves the equity and efficiency objectives of the reform, including by introducing a personal income tax, broadening the VAT base, reducing VAT and corporate tax rates, and eliminating minor taxes. Given that it would be approved only in mid-December, its implementation has been shifted to July 1 to give time for necessary regulations and tax administration reforms to be put in place. As the reform is broadly revenue neutral, the delay should not affect the 2007 fiscal program.

16. Other fiscal reforms. Once the tax reform is approved, the government intends to work closely with Congress to ensure the passage of the police pension fund reform law in 2007. Bills for the reform of the banking employee and the military pension funds, needed to reduce contingent liabilities, are being prepared for submission to Congress in early 2007. Also, remaining domestic arrears (about ½ percent of GDP) are expected to be phased out in 2007-08. On public enterprises, measures to ensure more efficient operations over the medium term are being considered, including stronger links of wages to productivity gains, and establishing public-private partnerships. Over the medium term significant fiscal rigidities, posed by high social security transfers and wage outlays, remain a challenge. The ongoing reforms to specialized pension funds and the envisaged civil service reform are therefore important steps in the right direction.

C. Financial Sector Reforms

17. Financial sector law. The draft law in Congress would address key vulnerabilities identified in the FSAP, including by increasing central bank independence and strengthening the supervisory, deposit insurance and bank resolution frameworks. Although the law was submitted to Congress a year ago, discussions to reach consensus will only start in 2007 due to the crowded legislation agenda. While opposition to some aspects of the reform could arise in the Congressional debate, the authorities reaffirmed their commitment to the reform package and expressed confidence that it will be approved next year. Capitalization of the central bank will follow approval of the financial sector law, which the authorities expect in 2007. There are also plans to improve financial sector supervision further to ensure that the new regulatory framework can be effectively implemented and enforced.

18. Housing bank. Despite difficult and protracted negotiations with the unions, BHU’s restructuring has moved forward and its completion is now expected in early to mid-2007 (Box 1). All nonperforming loans have been transferred or prepared for transfer to fiduciary trusts. A law has been submitted to Congress that will create a housing finance agency to administer the trusts and limit BHU’s activities to granting mortgage loans on commercial terms. Still, the submission and approval of the business plan by the superintendency is pending, as the external consultants developing the plan have been making slow progress.

BHU Restructuring

Key features. The plan was adopted in February 2006 to transform the state housing bank into a viable institution. It includes recapitalizing the bank, reducing operating costs, and limiting its mandate to residential mortgage lending on commercial terms, while transferring housing policy to the government.

  • Fiduciary trusts. Trusts are being established with the ministry of finance and BHU as the beneficiaries. Following the resolution of labor disputes in July, the conversion of the loan portfolio of BHU to a new system began with a delay and all nonperforming loans have been transferred or have been prepared for transfer to trusts.

  • Recapitalization. With the transfer of all nonperforming assets the government will assume a similar amount of liabilities and further recapitalize BHU (some US$170 million were approved in the context of the revised 2007 budget).

  • New agency. Legislation has been sent to Congress to create an agency within the nonfinancial public sector. It will manage the nonperforming assets held by trusts, and conduct the housing policy for the government.

  • Reducing operating costs. Agreement has been reached with the union to reduce total labor costs by about two-thirds, partly by transferring housing policy to the government.

  • Business plan. The authorities expected to finalize a business plan satisfactory to the Superintendent of Banks, and modify laws and regulations to harmonize BHU’s new mission with the plan in early 2007.

IV. Program Monitoring

Waivers for the nonobservance of mainly structural performance criteria are requested based on strong macroeconomic outcomes, delayed implementation, remedial actions, and commitment to implement measures between now and end-2007.

19. Quantitative performance criteria. All quantitative criteria for end-June 2006 were observed. Preliminary data for end-September indicate that all quantitative performance criteria as well as all continuous criteria were met, except for one: the performance criterion on gross public debt was missed due to higher-than-expected bond placements. However, this was compensated by higher international reserves and government deposits in the central bank, implying no increase in net debt. Final data will be reported prior to the Board meeting.

20. Structural conditionality. Waivers are being requested for the non-observance of the following structural performance criteria, based on the strong macroeconomic outcomes, and remedial actions in place, or reforms expected to be implemented in December 2006 and in 2007 (Letter of Intent, Table 1):

  • Begin to implement a comprehensive tax reform (September 15). A waiver is requested as the tax reform is expected to be adopted with a delay by the time of the Board meeting (prior action).

  • BHU restructuring (end-August and end-November). Remedial actions have been taken: all nonperforming loans have been transferred to a trust or prepared for such transfer. With progress in other key areas, including submission of legislation to restrict BHU’s activities, restructuring is moving forward. The waivers are requested based on progress consistent with completion of the reform in early to mid-2007.

  • Begin to implement financial sector reform (end-November). Given the crowded legislative agenda and the time needed to garner political consensus, the authorities are working with Congress to ensure implementation of the law in 2007.

  • Specialized pension fund reforms (end-October and end-November). The authorities intend to submit to Congress the reform of the banking employee fund and the military pension fund reform in early 2007. With Congress in recess from mid-December to March, the delay should have only a minor impact on the timing of Congressional passage. On the police pension reform, the authorities are also committed to work with Congress to ensure that it is passed in 2007; its delayed implementation will only have a minor impact on the public finances.

21. Financing assurances. The authorities are making good faith efforts to honor in 2007-08 obligations that are due, including overdue obligations that are small and do not pose risks to the program’s financing.

V. Staff Appraisal

Early exit from Fund financial support signals impressive progress since the crisis, but it will be important to continue to entrench macroeconomic stability and deepen structural reforms.

22. Achievements. Sound macroeconomic policies and favorable external conditions, have contributed to the sharp recovery since the 2002 crisis. Several years of large primary fiscal surpluses, sound debt management, and financial sector restructuring have led to a significant fall in debt ratios and a reduction of rollover risk, and a strengthened liquidity position of the financial system. Prudent monetary policy, within a framework of exchange rate flexibility, has been instrumental in reducing inflation and inflation expectations to single digits. This has been accompanied by key fiscal and financial reforms, improving Uruguay’s growth potential and enhancing access to international markets.

23. Exit from the Fund arrangement. The authorities’ decision to end the arrangement reflects the growing strength of the external position, and the improvement in the debt profile. It also reflects a sense that the task of implementing various structural reforms requires a more flexible timetable than associated with formal conditionality, and that the country has earned a measure of market confidence in its ability to deliver results.

24. Remaining vulnerabilities and challenges. Even as the economy has been made more resilient to shocks, public debt remains high and exchange rate risk significant, which emphasizes the importance of further reducing the debt ratio and tilting its composition toward local currency instruments. International reserves, though much higher than envisaged, are still low compared to other dollarized economies. And much remains to be done to complete the structural reform agenda, including enhancing central bank independence, reducing financial system vulnerabilities, and addressing long-standing weaknesses of specialized pension schemes.

25. Monetary policy. The central bank has appropriately lowered monetary targets and tightened monetary conditions, signaling the authorities’ commitment to low inflation. The central bank should remain ready to tighten monetary policy further should inflation pressures reemerge; an earlier reduction in money growth will facilitate meeting the end-2007 objectives. Within the overall framework of exchange rate flexibility and policies to deliver low inflation, it is key to continue purchasing foreign exchange opportunistically.

26. Fiscal policy and reform. To ensure achievement of the fiscal targets, spending plans should be executed as projected revenues are secured. In the event of slower than projected improvements in public enterprises or tax revenue shortfalls, it will be key to adopt compensatory measures, without compromising the quality of public spending. The impending approval of the tax reform would be a major accomplishment, and should yield important improvements in the efficiency and fairness of the tax system. It is now essential to press ahead with preparing the collection agencies for the administration of the new personal income tax and implementing regulations. It is also key to resist demands for additional spending and to continue adjusting public tariffs in line with underlying cost developments. The reform plans for the budget process, the customs agency, and the auditing and enforced collection functions of the social security bank are important steps, and their implementation over the next year should further bolster public finances. It will also be important to address expenditure rigidities, including through civil service reform and moving ahead with specialized pension reform.

27. Financial sector reforms. The progress in tightening prudential regulations to internalize risks from high financial dollarization and strengthening the supervisory framework is commendable. While delays in restructuring the housing bank are regrettable, remedial actions have been taken. Swift adoption of a business plan will enable the bank to function as a viable institution in the near term. Approval of the financial sector law, aimed at increasing central bank independence and strengthening the supervisory, deposit insurance and bank resolution frameworks, as well as capitalization of the central bank, are key next steps in the authorities’ reform agenda.

28. Other growth-enhancing reforms. The recent establishment of a private sector relations office at the ministry of finance to facilitate private investment and to help sustain growth is a welcome development. Approval of the bankruptcy bill currently in Congress will also represent an important milestone to improve the business environment.

29. Completion of the reviews. Staff recommends completion of the fifth and sixth reviews and the financing assurances review. Although there have been some delays in implementing the ambitious structural agenda, approval of the all important tax reform is a prior action for Board consideration, the track record of macroeconomic management is strong, and the authorities intend to persevere with remaining reforms. As such, the staff supports the authorities’ requests for waivers for the nonobservance of the quantitative performance criterion on public debt and the structural performance criteria citied in Table 1 of the Letter of Intent.

Table 1.

Uruguay: Selected Economic and Social Indicators

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Sources: Data provided by the Uruguayan authorities; and Fund staff estimates.

2006-08 numbers are large driven by the large scale FDI project in pulp mills.

Program definition (end of period data).

Covers debt of the NFPS and the central bank (excluding monetary policy instruments and free reserves).

Excludes nonresident deposits.

Includes reserve buildup through reserve requirements of resident financial institutions.

Table 2.

Uruguay: Performance under the 2006 Economic Program 1/

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PC= Performance Criterion; IT=Indicative Target.Sources: Ministry of Economy and Finance; and Central Bank of Uruguay.

As defined in the Technical Memorandum of Understanding.

Customs reform plan did not include collection targets, as it was considered to be premature at this stage.

Cumulative changes from the previous calendar year.

2006 targets are cumulative from end-September 2005.

All maturities.

Waiver requested based on that the higher-than-expected bond placementes were fully reflected in higher government deposits with the central bank and official international reserves.

Table 3.

Uruguay: Summary Accounts of the Banking System

(In millions of U.S. dollars)

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Sources: Central Bank of Uruguay; and Fund staff estimates and projections.

Includes all outstanding liabilities to the IMF, but excludes liabilities to resident financial institutions.

Program figures for 2005 are estimated at December 2004 exchange rates, while those for 2006 are estimated at September 2005 exchange rates.

Monetary base excludes from peso monetary liabilities the net government and BPS deposits with BROU, which are subject to 100 percent requirements.

The Banco de la Republica Oriental de Uruguay (BROU), Banco Hipotecario de Uruguay (BHU; mortgage institution), private banks, and cooperatives.

Includes government and nonbank financial institution deposits at the central bank.

Table 4.

Uruguay: Public Sector Operations

(In millions of pesos)

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Sources: Ministry of Finance; and Fund staff estimates.

Up to 2006 on a cash basis. Starting in 2007, on a modified cash basis, which includes variations of the stock of arrears and floating debt. The 2007 fiscal balance may be adjusted downward by up to 0.2 percent of GDP for capital spending in identified projects financed with proceeds of the sale of NBC.

Starting in 2004 the definition includes an expanded government concept, forestry subsidies, and membership fees of international organizations.

Asset recoveries related to bank restructuring costs incurred in 2002 are credited in 2004. In 2006 includes US$20 million for financing of the deposit insurance scheme and US$407 million for the net value of the recapitalization of the BHU

For Q1-Q3 figures, amounts as percentage of 3/4 of annual GDP.

Country Report No. 05/109.

Table 5.

Uruguay: Public Sector Financing Outlook, 2006-2007 1/

(In millions of U.S. dollars)

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Sources: Central Bank of Uruguay; and Fund staff estimates.

Excludes the assumption of net liabilities (noncash) from BHU in the fourth quarter of 2006 of US$407 million.

Includes official debt.

Table 6.

Uruguay: Balance of Payments

(In millions of US$, unless otherwise stated)

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Sources: Central Bank of Uruguay; and Fund staff estimates and projections.

Includes secondary market transactions between residents and non-residents.

Projected amortization payments on obligation schedule.

Follows respective TMU definitions.

Excluding imports related to the construction of pulp mill projects (Botnia and ENCE).