Press Release: IMF Executive Board Completes Seventh and Final Review of Nicaragua's Extended Credit Facility and Approves US$8.74 Million Disbursement
October 21, 2011Press Release No. 11/377
October 21, 2011
The Executive Board of the International Monetary Fund (IMF) today completed the seventh and final review of Nicaragua’s economic performance under its Extended Credit Facility (ECF) arrangement, and the financing assurances review. Completion of the review allows for the final disbursement to Nicaragua of an amount equivalent to SDR 5.55 million (about US$8.74 million). Total disbursements so far had been of SDR 72.45 million (about US$114.1 million).
Program performance was satisfactory. All quantitative performance criteria for end-June 2011 were met with margins, and the structural agenda is broadly on track.
The Executive Board approved a three-year ECF (formerly known as the Poverty Reduction and Growth Facility) in the amount of SDR 71.5 million (about US$111 million) in October 2007 (see Press Release No. 07/224). In September 2008, the Board increased financial support under the program by SDR 6.5 million (about US$10 million) to help Nicaragua cope with the natural disasters of 2007 (see Press Release No. 08/204). In November 2010, the Executive Board approved an extension of the arrangement through December 4, 2011.
Following the Executive Board discussion on Nicaragua, Mr. Min Zhu, Deputy Managing Director and Acting Chair, issued the following statement:
“The Nicaraguan economy grew strongly in the first half of 2011 despite deteriorating global conditions. Growth continues to be broad based. Inflows of foreign investment and official borrowing are expected to more-than-finance the still-high external current account deficit and contribute to reserve accumulation in 2011. The authorities’ policies aim to enhance the resilience of the economy against downside risks.
“Further fiscal consolidation to reduce public indebtedness remains a key priority, with a focus on restraining government current spending (especially the wage bill), sustaining gains in revenue mobilization, and strengthening the financial position of the energy sector. The authorities’ decision to use the revenue overperformance expected for this year to pay down government debt is appropriate. Efforts have been intensified to create space for investment and well-targeted assistance to the poor. Key structural reforms in the fiscal area include enhancing tax administration, broadening the tax base, and reforming the pension system and the civil service.
“The Nicaraguan banking system remains generally sound. Banks are well capitalized, profitability continues to improve, and liquidity buffers remain ample. The authorities intend to step up their efforts to improve coordination and information exchanges with other regional supervisors, and to monitor volatile aid-related deposits.
“Important steps have been taken to advance the structural reform agenda, including the approval of a law regulating the micro-finance sector and the introduction of norms requiring greater disclosure by financial cooperatives and trust funds. Significant progress has been made in managing and reporting aid flows, and continued improvements in this area would help foster confidence, facilitate macroeconomic management, and mobilize donor support,” Mr. Zhu said.