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.

Abstract

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.

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

1. Prior action. The tax reform bill was passed by Congress on December 19, 2006, and is in line with the draft bill discussed in the staff report.

2. Performance criteria. Final data confirm that all end-September 2006 quantitative performance criteria have been observed, except for the ceiling on the nonfinancial public sector gross debt, which was missed by a margin of US$418 million, slightly more than the margin of US$340 million mentioned in the staff report (Table 1). The higher debt is fully reflected in net international reserves and government deposits in the central bank, implying no increase in net debt relative to program targets.

Table 1:

Performance Under the 2006 Economic Program 1/

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

As defined in the Technical Memorandum of Understanding.

Cumulative changes from the previous calendar year.

2006 targets are cumulative from end-September 2005.

All maturities.

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

Uruguay: 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
Author: International Monetary Fund