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© 2009 International Monetary Fund
May 2009
IMF Country Report No. 09/143
Guatemala: Request for Stand-By Arrangement—Staff Report; Staff Supplement; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Guatemala
In the context of the request for a Stand-By Arrangement for Guatemala, the following documents have been released and are included in this package:
The staff report for the Request for Stand-By Arrangement prepared by a staff team of the IMF, following discussions that ended on March 26, 2009, with the officials of Guatemala on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on April 13, 2009. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.
A staff supplement of April 13, 2009, on the assessment of the risks to the Fund and the Fund’s liquidity position.
A Press Release summarizing the views of the Executive Board as expressed during its April 22, 2009, discussion of the staff report that approved the request.
A statement by the Executive Director for Guatemala.
The documents listed below have been separately released.
Letter of Intent sent to the IMF by the authorities of Guatemala*
Memorandum of Economic and Financial Policies by the authorities of Guatemala*
Technical Memorandum of Understanding*
*Also included in Staff Report
The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.
Copies of this report are available to the public from
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International Monetary Fund
Washington, D.C.
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INTERNATIONAL MONETARY FUND
GUATEMALA
Request for Stand-By Arrangement
Prepared by the Western Hemisphere Department (In consultation with Other Departments)
Approved by Patricia Alonso-Gamo and Dominique Desruelle
April 13, 2009
Precautionary Stand-By Arrangement. In the attached letter of intent, the Guatemalan authorities are requesting an 18-month Stand-By Arrangement (SBA) with total access of SDR 630.6 million (about US$951 million). An initial purchase of SDR 420.4 million (about US$634 million) will become available upon Board approval of the arrangement; the remainder will be available in five quarterly purchases subject to reviews. The authorities intend to treat the arrangement as precautionary.
Context and rationale. Guatemala has made substantial progress in consolidating macroeconomic stability and implementing structural reforms. Adverse external conditions, however, are affecting economic activity and financial conditions. The authorities have taken a number of upfront measures to mitigate the impact of the external shock and preserve macroeconomic stability. The program will support the authorities’ policies and provide insurance against significant downside risks.
The program. The authorities’ policy strategy has four key elements: (i) a moderate fiscal stimulus to support domestic demand, financed with substantial external resources from multilaterals to minimize crowding out the private sector; (ii) a monetary policy focused on consolidating the decline in inflation and a flexible exchange rate to facilitate economic adjustment; (iii) a strengthening of financial sector policies to increase the resilience of banks, and enhance the banking sector safety net and resolution procedures; and (iv) a refocusing of public expenditures toward strengthening social spending and labor-intensive public works.
Discussions. A staff team comprised by G. Lopetegui (Head), I. Vladkova-Hollar, R. Luzio, and P. Morra (all WHD), and C. Henn (SPR) visited Guatemala City during March 16–26 to hold program discussions. A. Schipke (regional resident representative) assisted the mission. P. Alonso-Gamo (WHD) participated in the final discussions. The mission met with Minister of Finance Juan Alberto Fuentes Knight, Central Bank President Maria Antonieta de Bonilla, and Superintendent of Banks Edgar Barquin.
Publication. The authorities have consented to the publication of the staff report and the program documents.
Contents
I. Background
II. Recent Developments
III. The Authorities’ Program
A. Objectives
B. Macroeconomic Framework
C. Fiscal Policy
D. Monetary and Exchange Rate Policy
E. Financial Sector Policy
F. Social Protection and Growth Policy
IV. Risks
V. Program Access, Conditionality, and Capacity to Repay the Fund
A. Access
B. Program Monitoring and Conditionality
C. Capacity to Repay the Fund
VI. Staff Appraisal
Tables
1. Selected Economic and Social Indicators
2. Monetary Sector Survey
3. Summary Balance of Payments
4. Combined Public Sector Balance
5. Indicators of Vulnerability
6. Implementation of the Main FSAP Update Recommendations
7. External Debt Sustainability Framework, 2004–2014
8. Public Sector Debt Sustainability Framework, 2003–2014
9. Indicators of Fund Credit 2006-2014
10. Proposed Access, 2009–2010
Figures
1. Recent Developments
2. External Sector
3. Fiscal Sector, February 2009
4. Weekly Financial Sector Developments
5. Financial Sector, January 2009
6. Public Debt Sustainability: Bound Tests
7. External Debt Sustainability: Bound Tests
Box
Box 1. Exceptional Access Criteria
Attachments
I. Letter of Intent
II. Memorandum of Economic and Financial Policies for 2009–2010
III. Technical Memorandum of Understanding
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INTERNATIONAL MONETARY FUND
Guatemala—Assessment of the Risks to the Fund and the Fund’s Liquidity Position
Prepared by the Finance and Strategy, Policy, and Review Departments
(In consultation with other Departments)
Approved by Andrew Tweedie and Dominique Desruelle
April 13, 2009
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Press Release No. 09/142
FOR IMMEDIATE RELEASE
April 23, 2009
International Monetary Fund
Washington, D.C. 20431 USA
Telephone 202-623-7100
Fax 202-623-6772
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April 20, 2009
