Abstract
There has been progress in strengthening public financial management; however, improving budget execution and strengthening public finances is required. The tax and custom administration reforms will help bolster private sector-led growth and meet the ambitious revenue target to finance priority expenditure. Monetary and exchange rate policy is required to reduce inflation while preventing an overshooting of the exchange rate. Further progress is needed to foster financial sector development. A more ambitious rehabilitation plan for the electricity sector needs to be designed and implemented with urgency.
1 This statement summarizes economic developments since the issuance of the staff report (January 11, 2008). These developments do not alter the thrust of the staff appraisal.
2 Annual inflation at end-December was 8.2 percent, somewhat better than anticipated, owing to lower than expected nonfood prices.
3 Preliminary fiscal data indicate that tax revenue collections were higher than expected through end-December 2007, both in terms of domestic taxes (in particular VAT and property tax) and customs revenue.
4 Revised data through the first three quarters of the year suggest that the external current account position for 2007 would be slightly stronger than previously projected (by about 0.3 percent of GDP). This largely reflects higher than expected transfers, which have also allowed more foreign exchange reserve accumulation than projected previously.
5 Preliminary monetary data indicate that the authorities have comfortably met the end-year indicative targets for net foreign assets and net domestic assets. However, reserve money at end- December was higher than projected owing to less open market sterilization operations than anticipated.
6 The nominal effective exchange rate has been fairly stable through January 2008, and the average yield on treasury bills has remained slightly positive in real terms.