## 1. Monetary Tools to Loosen the Stance

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### Background and pandemic context
- Policy response mix:
  - Fiscal policy: protect jobs and companies and buttress the safety net.
  - Monetary policy: policy rate cut and substantial quantitative easing.
  - Macroprudential measures: e.g., removing requirements for additional capital buffers.
- Key macro-financial outcomes and indicators:
  - Policy rate reduced by 65bps to 0.1 percent.
  - Quantitative easing program expanded by £300bn; additional expansion by £150bn in early November.
  - BoE set to raise its holdings to some 40 percent of the total gilt stock.
  - GDP: fell 22 percent in 2020Q2 (relative to 2019Q4); grew 15.5 percent in Q3 2020; economy about 10 percent below its January 2020 level by October 2020.
  - Core inflation: 1.5 percent in October 2020; CPI end-period 2020: 0.7 percent.
  - Household saving rate: soared to an overall saving rate of 28 percent of GDP in 2020Q2.
  - Corporate additional debt Q1–Q2 2020: £70 billion (3¼ percent of GDP); government-guarantee schemes provided £65 billion.
  - CET1 ratios: 15.7 percent (up 0.7 percent since early-2020).
  - Public sector net debt projected to rise to 106 percent of GDP at end-FY2020 (from 85 percent at end-FY2019).
  - Public sector overall balance projected around 19 percent of GDP in FY2020.

### Assessment of monetary tools (Box 1 — summary of findings)
- QE and balance sheet expansion:
  - QE viewed as a still-available channel that helps contain potential rises in rates and spreads amid heavy fiscal borrowing.
  - Constraint: BoE gilt holdings approaching some 40 percent of total gilt stock could limit further QE expansion because financial intermediaries need long-term safe assets.
- Negative policy rates:
  - The ELB is generally thought to be slightly negative.
  - Perverse channels (credit and cash hoarding) could be mitigated by tiering of reserves and encouraging banks to apply negative rates to large deposits.
  - Empirical studies find no evidence of a deleterious impact of negative rates on aggregate bank profits.
  - UK smaller banks and building societies could be particularly exposed to the interest margin channel; effects on non-bank financial intermediaries need better study.
  - BoE sees negative policy rates as part of its toolkit but requires further study on effectiveness, distributional and financial-sector impacts, and potential mitigating measures before deployment.
- Yield curve control:
  - Makes QE price dependent rather than quantity based; relies crucially on credibility.
  - May prevent balance sheet normalization for a longer period.
  - Limited room to influence expectations in the UK as the yield curve is already close to zero in the medium run.
- QE extended to assets beyond government bonds:
  - In principle compresses risk premia and improves funding conditions.
  - Purchases of lower-risk assets have not translated into a direct boost to bank lending or corporate investment in the UK or Europe.
  - Purchasing riskier debt securities or equity could be more powerful but risks sowing financial instability and increasing inequality.
- Subsidized loans to banks:
  - BoE currently provides loans conditional on lending targets through term funding schemes (rates as low as the policy rate).
  - Offering loans below the policy rate (analogous to ECB’s TLTRO III) could encourage bank lending and mitigate profitability damage from negative rates, but would have fiscal implications and require Treasury coordination.

### Key monetary risks and considerations
- Uncertainty about net impact of policy changes since March given a simultaneous decline in the neutral rate.
- QE purchases pushing BoE gilt holdings toward some 40 percent of the total gilt stock may constrain further balance sheet expansion.
- Negative rates require preparatory operational work and further analysis of transmission through the banking sector.
- Other instruments (yield curve control, broader QE, subsidized loans) have trade-offs: credibility needs, limited room to influence expectations, limited past transmission to bank lending, fiscal implications, and potential financial-stability or governance issues.

### Banking system: systemic risks and measures to support intermediation
- Systemic risk considerations:
  - Potential systemic concern from falling property prices (especially retail and office segments).
  - Mid-cap and smaller banks with narrower business models and higher exposures to risky areas (e.g., property) warrant close supervision.
  - Preserve limits on loan-to-value, debt-to-income, and interest coverage ratios; review risks continuously.
- Supporting intermediation and buffer usability:
  - Large banks have reasonably strong capital per BoE stress tests; release of countercyclical capital buffers increases usable buffers.
  - Staff recommendations to help banks use buffers:
    - Clarify terms and procedures for banks to access state loan-guarantees to avoid tying up bank resources.
    - Commit to provide ample forward notice on potential changes to regulatory buffers.
    - Resume suspended Annual Cyclical Scenarios (ACS) stress testing and use results to identify weak institutions; calibrate ACS to avoid imposing unnecessary procyclical capital increases.
  - Staff recommended extending dividend payment restrictions to ensure capital remains ample after losses materialize; guidance highlighted cautious, case-by-case lifting of dividends tied to capital and stress-test outcomes.

### Policy recommendations and operational guidance
- Near-term monetary guidance:
  - Policy should remain data dependent with a bias towards loosening.
  - Monetary policy: remain accommodative until inflation is durably back to target and significant progress made in eliminating spare capacity.
  - Support BoE commitment to further government bond purchases; consider incremental introduction of other tools (e.g., negative policy rates) only after full assessment.
- Coordination and fiscal-financial interaction:
  - Recognize QE’s role in containing yields amid heavy fiscal borrowing; coordinate with Treasury on any instrument that has fiscal implications (e.g., subsidized loans).
- Financial-sector operational measures:
  - Continue close supervision; buttress system funding ability.
  - Extend dividend payment restrictions where appropriate; monitor bank buffer use.
  - Better define trigger points and procedures for activation of government guarantees to avoid tying up bank resources.
- Contingency and preparedness:
  - Evaluate effectiveness and distributional/financial-stability impacts of negative rates and other non-standard tools before deployment.
  - Maintain readiness to provide market liquidity in major currencies and reassure on sufficiency of system-wide liquidity buffers in case of market turbulence.
  - Monitor non-bank vulnerabilities revealed by the March 2020 “dash-for-cash” and consider regulation or BoE liquidity facilities for non-banks in coordination with FSB work.

### Key statistics and operational constraints (selected)
- Policy rate: reduced by 65bps to 0.1 percent.
- QE expansions: £300bn (initial), additional expansion by £150bn in early November.
- BoE gilt holdings target: increase to some 40 percent of total gilt stock.
- Bank CET1 ratio: 15.7 percent (up 0.7 percent since early-2020).
- Household overall saving rate: 28 percent of GDP in 2020Q2.
- Corporate additional debt Q1–Q2 2020: £70 billion (3¼ percent of GDP); guaranteed schemes: £65 billion; CCFF purchased commercial paper worth £20 billion.
- Public sector net debt: projected to rise to 106 percent of GDP at end-FY2020 (from 85 percent at end-FY2019).

*Source: IMF staff report excerpt (UNITED KINGDOM).*

### 1. Monetary Tools to Loosen the Stance _________________________________________________________ 19

### 1. Monetary Tools to Loosen the Stance _________________________________________________________ 19

### Background and pre-pandemic conditions
- Growth moderated to an average of about 1½ percent after the June 2016 Brexit referendum.
- Unemployment declined below 4 percent; the official unemployment rate was 3.9 percent in March 2020.
- Inflation was beneath the BoE’s 2 percent target.
- Government debt had climbed above 80 percent of GDP by 2016 but had started to edge downwards since.
- The current account deficit was 4.3 percent of GDP in 2019.
- Net international investment position was only mildly negative.
- Structural challenges noted: weak productivity growth, large regional disparities in income, population aging, and need to strengthen policies to comply with targeted greenhouse gas emissions.

### Pandemic arrival, policy response, and economic impact
- The pandemic reached the UK in March 2020 and progressed to a second wave; the death toll relative to population exceeds the average of advanced European peers.
- Containment measures in late March included travel restrictions, social distancing, closures of entertainment, hospitality, non-essential shops and indoor premises, and increased testing.
- A three-tier system was implemented in September; a one-month England-wide lockdown occurred in November (construction, manufacturing and schools remained open).
- High-frequency mobility indicators show declines; these edged down recently.
- Authorities’ policy mix:
  - Fiscal policy: to protect jobs and companies and buttress the safety net.
  - Monetary policy: policy rate cut and substantial quantitative easing.
  - Macroprudential measures: e.g., removing requirements for additional capital buffers.
- Measures evolved: initial phasing out through October; Job Support Scheme launched in September; “eat out to help out” to support hospitality; support linked to tier of restriction and a revenue test; early-November lockdown returned businesses to original schemes with a sunset anticipated at end-March 2021; extensions for loan application windows and deferrals for mortgages, consumer credit and overdrafts.

Key economic outcomes and indicators:
- GDP fell 22 percent in 2020Q2 relative to 2019Q4.
- GDP grew 15.5 percent in Q3 2020.
- By October 2020 the economy had probably recovered to about 10 percent below its January level.
- Core inflation stood at 1.5 percent in October 2020.
- Employment effects:
  - Official unemployment rose from 3.9 percent in March to 4.8 percent in Q3 2020.
  - Job subsidies covered wages of almost a third of employees initially.
  - About 1.5 million SMEs drew on government guaranteed loans.
  - Online retail up 50 percent since February 2020; work from home increased from 5 percent of workers in 2019 to about 40 percent in June 2020.
- Sectoral impacts: consumer-facing services and contact services suffered outsized declines; contact services include hospitality, transport, recreation sectors and overall mobility.

### Private sector balance sheets and financial sector
- Households:
  - Saving rates soared in 2020Q2, producing an overall saving rate of 28 percent of GDP.
  - Loan arrears remained stable; moratoria on overdue mortgage and consumer credits provided temporary protection.
  - Housing outlook weakened by rising unemployment and expiration of the stamp duty holiday in H1 2021; downside scenarios point to a possible decline of about 10 percent or more in housing prices (CEBR, OBR).
- Corporates:
  - Total additional corporate debt taken on during Q1–Q2 2020 amounted to £70 billion, or 3¼ percent of GDP.
  - Government-guarantee schemes provided £65 billion in new financing.
  - CCFF purchased commercial paper worth £20 billion.
  - Expectations about future corporate debt distress sit in a broad range of £19 billion to £100 billion (1–5 percent of GDP).
- Financial sector:
  - CET1 ratios stood at 15.7 percent (up 0.7 percent since early-2020).
  - The countercyclical capital buffer was reset to zero.
  - Banks maintained significant liquidity buffers through Q2 2020.
  - Residential and commercial real estate exposures may pose risks for some institutions (e.g., building societies).
  - Non-banks experienced a “dash-for-cash” in March 2020 and were stabilized by BoE intervention; episode revealed vulnerability from procyclical positioning.
  - SME government-guaranteed loans jumped 28 percent since end-2019 and are concentrated in the 5 largest banks.
  - Clear procedures for handling increased defaults on government-guaranteed SME loans were not yet in place.

### Fiscal position and public sector implications
- Public sector net debt projected to rise to 106 percent of GDP at end-FY2020 (from 85 percent at end-FY2019).
- Overall balance projected to around 19 percent of GDP in FY2020.
- Explicit contingent liabilities tied to government-guaranteed loans around 3¼ percent of GDP.
- Public sector assets and liabilities represented 94 and 205 percent of GDP respectively in FY2018.
- Main fiscal measures in response to Covid-19 outbreak in FY2020–21 (impact on fiscal balance, percent of FY2020 GDP):
  - Total measures with impact on the fiscal balance: 13.6
  - Health sector: 4.3
  - Employment support: 3.8
    - Coronavirus Job Retention Scheme: 2.7
    - Self-Employment Income Support Scheme: 0.8
    - Boosting job searches, training, and apprenticeships, and job subsidies: 0.3
  - Support to households: 0.4
  - Support to businesses: 2.9
    - Business grant schemes: 0.6
    - Business rates (commercial property tax) relief: 0.5
    - Estimated losses under guaranteed loan schemes: 1.5
  - Other: 2.1
  - Measures without impact on the fiscal balance:
    - Deferral of VAT and self-assessment of income tax (amount not quantified in table)
    - Guaranteed loan schemes: 16.0 (percent of FY2020 GDP)
    - Trade credit reinsurance scheme: 0.5

### Structural shifts and distributional concerns
- Government schemes initially mitigated job losses and firm exits but evidence accumulating that structural shifts are underway.
- Sectors relying more on job subsidies (hospitality and leisure) tend to employ less qualified and lower-paid workers, risking widened inequality as support sunsets.
- The pandemic accelerated digitalization trends: online retail and telework increases noted above.

### Brexit end-of-transition preparations and risks
- Transition period to December 31, 2020; negotiations ongoing in early December 2020 on post-Brexit trade deal. Key outstanding issues: level playing field provisions, governance, access for EU fishermen to UK waters; Northern Ireland issues discussed separately.
- Border preparations:
  - Funding of £9.5bn to date for border infrastructure, staffing, new IT systems, upscaling customs intermediary sector, training more customs agents to process up to 215 million additional customs declarations each year, and public information campaigns.
  - Customs requirements on the UK side to be introduced in progressive phases over the first half of 2021.
  - National Audit Office report indicated border preparedness concerns.
  - Bank of England Decision Maker Panel survey: 4 percent of businesses report fully prepared, 41 percent “as ready as can be,” 33 percent partially prepared.
- Financial sector preparations:
  - Legislation for temporary permissions and recognition regimes to allow EEA firms to continue operating in the UK for a limited period.
  - Temporary transitional power for UK financial regulators to phase in regulatory changes.
  - Provisions to allow firms that do not enter temporary permission regimes to run-off UK business in an orderly fashion.
  - A package of 17 equivalence decisions to EEA States covering capital requirements, insurance and re-insurance activities, and CCPs; equivalence decisions to come into effect on January 1, 2021.
  - European Commission granted time-limited equivalence for UK-based CCPs for 18 months from January 1, 2021. ESMA recognized all three UK-based CCPs.
  - UK banks and insurers have been building out EEA entities and restructuring activity to minimize disruptions.
  - Supervisory cooperation arrangements between UK and EU regulators are in place for the end of the transition period.
- Border preparations were described as lagging compared with financial sector preparations.

### Risks and outlook summary
- Deep near-term output hit with partial recovery in Q3 2020 but truncated by second wave and renewed restrictions.
- Elevated public debt and large fiscal deficits in FY2020.
- Corporate sector faces liquidity and solvency risks; expected increase in corporate debt distress within a broad range of £19 billion to £100 billion (1–5 percent of GDP).
- Financial sector broadly resilient but pockets of vulnerability (real estate exposures, building societies, concentration of guaranteed loans in large banks, and non-bank procyclicality).
- Distributional risks as lower-paid workers concentrated in heavily supported but vulnerable sectors could face worse outcomes when support phases out.
- Brexit transition uncertainty and border preparedness pose additional near-term risks to trade and business operations.

*Source: IMF staff report excerpt (UNITED KINGDOM).*

### 12. The UK is confronting the combination of a temporary health shock (Covid) and a

### 12. The UK is confronting the combination of a temporary health shock (Covid) and a longer lasting trade shock (Brexit).

### Baseline assumptions and policy-area assumptions
- Pandemic and Brexit assumptions:
  - Second Covid lockdown ending on December 2 followed by some temporary localized lockdowns.
  - Reduced mobility would gradually unwind over 2021 (starting from a level similar to October 2020).
  - UK and EU reach a last-minute free trade agreement implemented with some frictions during the first half of 2021.
- Policy assumptions:
  - Pandemic fiscal support measures are funded per the November 2020 Spending Review and sunset as the pandemic subsides in 2021.
  - Plans for higher public investment over the next three fiscal years are assumed implemented, alongside announced plans for higher labor market support.
  - Monetary policy supports a gradual move of inflation back to target.
  - No systemic financial sector risks materialize; current macroprudential stance preserved short-run and only tightened over the medium term.

- Policy Area Assumptions (explicit):
  - Fiscal:
    - The end of Covid-related support measures per the current schedule reduces government spending by about 11 percent of GDP from FY2020 to FY2021.
    - No additional fiscal support (relative to the situation as of end-November 2020) is assumed.
    - Gradual consolidation with measures of 0.5 percent of GDP per year starts in FY 2023, with the goal to reach the debt-stabilizing primary balance by FY2025.
  - Monetary:
    - Consistent with market expectations, policy remains accommodative over the next two years to support the recovery.
    - Gradual normalization of the central bank balance sheet and rates is undertaken only when inflation is forecast to reach the target durably.
  - Structural:
    - Public investment rises to begin to address infrastructure gaps and climate targets.
    - Job support measures (wage subsidies, retraining, apprenticeships, and job search assistance) mitigate the unemployment spike.
  - Financial:
    - Required capital ratios are maintained at 0 percent until March 2022 for the Countercyclical Capital Buffer.
    - Systemic Risk Buffer maintained at the rates determined for each bank in December 2019 until December 2021.
    - Limits on loan-to-value, debt-to-income, and interest coverage ratios remain at present levels.

### Near-term outlook, key projections, and dynamics
- Growth and labor market:
  - Economy expected to contract again in 2020Q4 given the second lockdown.
  - Annual growth would be at about -11.2 percent in 2020.
  - GDP would partially recover in 2021, with reopening pushing annual growth up to 5.7 percent.
  - Unemployment would inch up gradually and climb above 7 percent in H1 as support sunsets for all employees.
  - Corporate stress would build up as demand stays weak, presenting a headwind to higher quarter-over-quarter growth within 2021.
- Inflation:
  - Inflation is expected to gradually rise back to the 2 percent target, reaching it by late 2022.
  - Weak demand holds core inflation down notwithstanding cost-push pressures from the pandemic.
  - Headline inflation may show upward volatility in 2021 as VAT holidays end and energy prices rise.
- Policy support role:
  - Policy support, including the monetary expansion announced in November, would help the recovery of inflation back to target.

### Medium-term outlook and scarring
- Scarring and investment:
  - Pandemic expected to be temporary but with longer-lasting effects via corporate failures, sectoral shifts, frictional and structural unemployment, and some stranded capital.
  - R&D investment has fallen by 15 percent due to Covid.
  - Average capital stock growth would be 1.2 percent during 2020–25, down from 2 percent for 2015–19.
  - Pre-Covid level of output would only be reached by 2023.
  - Output would remain about 5 percent below the pre-Covid trend by 2025.
- Comparative assessment:
  - Outcome would be better than the average advanced economy recession, since this episode lacked a financial boom-bust and saw strong countercyclical policy reaction.
  - Scarring is projected to be larger than in other large European economies, which are less specialized in contact-intensive services.

### Risks and alternative scenarios
- Overall risk tilt:
  - Risks are tilted to the downside, with unusual uncertainty surrounding the baseline due to developments with Covid and Brexit.
- Upside scenario:
  - Rapid deployment of an effective vaccine ends contagion risk earlier than expected, boosting confidence, easing constraints on economic activity, putting a floor under property price declines, and accelerating recovery of consumption and investment.
  - Even in the upside, a full return to the pre-Covid trend would be highly unlikely given pandemic impacts to date.
- Downside scenario:
  - Prolonged or intensified social distancing and/or delayed vaccine deployment and deeper tradables-sector impacts from a no-deal Brexit.
  - Results: deeper structural transformation, higher corporate bankruptcies and unemployment, sharper macro-financial feedbacks (property price falls, banks protecting balance sheets), and persistent economic weakness while balance sheets are restored.
- External and fiscal vulnerability notes:
  - Public debt is sustainable and some fiscal space exists.
  - Debt-and GFN-to-GDP ratios are elevated and above the MAC DSA high risk thresholds in the baseline.
  - Large domestic financial sector appears to have capacity to absorb shocks, especially through banks with limited government exposure.
  - External position is weaker than level implied by medium-term fundamentals; net external debt remains relatively low though high gross liabilities present vulnerability; exchange rate depreciation would improve the NIIP.

### Authorities’ views (BoE, OBR, Treasury)
- OBR near-term outlook similar to staff’s.
- Bank of England projects a slightly faster recovery with stronger investment pickup and a short-lived effect on trade and GDP from adjustment to new UK-EU trading arrangements; uncertainty dissipates from 2021Q2 onwards in BoE view.
- In the medium term, BoE and OBR anticipate less long-term scarring in their central scenarios (BoE: 1¾ percent; OBR: 3 percent).
- Authorities emphasize uncertainty tied to pandemic resolution and transition to new UK-EU trading arrangements; Treasury committed to “whatever it takes” to support the economy.

### Key policy priorities and recommendations
- Over-arching priority:
  - Contain the pandemic and return the UK to full employment on a sustainable and inclusive growth path as quickly as possible.
- Four consultation topics motivating the strategy:
  - Policies to contain the health and economic impacts of the pandemic: aggressive policy response and clear forward guidance to maximize impact.
  - Policies to facilitate adjustment: focus on labor reallocation and balance sheet repair, and fiscal adjustment once recovery is entrenched to reverse debt dynamics.
  - Securing strong policy frameworks: ensure policies remain well-anchored and adapt frameworks where necessary.
  - Contingency plans for a no-deal Brexit: prepare for deeper shocks that would amplify policy needs.
- Immediate fiscal policy guidance:
  - Continue fully funded and well-calibrated pandemic support policies until impacts abate.
  - November spending review decisions to enhance health spending and extend job and firm support into 2021 are important for forward guidance.
  - Review of policies in January and March to adapt as necessary.

### Targeted fiscal measures and implementation guidance
- Gaps and targeted fixes:
  - Self-employed coverage shortfall: the Self-Employment Support Scheme left around 500,000 people ineligible.
  - Guaranteed lending programs set to expire in January; case to continue them for persistent firm productivity impacts, but recalibration recommended (reduced guarantee coverage as impacts fade; more emphasis on grants, incentives to build up equity, and tax incentives for viable companies).
- Furlough (Job Retention Scheme) targeting:
  - Scheme well suited to full lockdowns but less so to localized lockdowns or gradual decline in social distancing.
  - Consider lower wage replacement rates and/or greater employer contribution when damage to firms declines.
  - Sectoral or regional targeting could improve cost-benefit but increase administrative burdens; larger companies could bear more of the burden for establishing eligibility.
- Transparency and accountability:
  - Maintain strong reporting and public financial management; address National Audit Office concerns about some contracts.
  - Ensure public access to procurement contracts related to Covid, disclose beneficial owners of contract recipients, and continue publication of ex-post audits.
- Additional discretionary stimulus:
  - Additional discretionary fiscal support in FY21 could reach 1–2 percent of GDP beyond current plans to supplement domestic demand while consumption and investment remain weak.
  - Emphasize targeted measures with potentially high multipliers; a key element could be public investment beyond current plans.
  - Reinforce expansionary impact by (i) committing not to cut public investment in the fiscal adjustment phase and (ii) accelerating preparations now for a big construction push when the pandemic ends.
  - Achieving high multipliers requires careful identification and efficient implementation of projects; staff recommended an externally-validated assessment of the revised PIM approach based on the Fund’s PIMA framework.
  - A scaled-up investment program could help address regional inequality and help meet legally prescribed climate targets.

*IMF staff assessment based on the content of the chapter.*

### 23. While fiscal policy is the key economic tool at present, there is a role for continued

### 23. While fiscal policy is the key economic tool at present, there is a role for continued 

### Monetary policy stance and near-term guidance
- With inflation not projected to return to target soon and fiscal stimulus requiring more time to have an impact, the BoE appropriately extended QE by £150 billion in early November and reiterated forward guidance that policy will not be tightened at least until inflation is durably back to target and significant progress is made in eliminating spare capacity.
- Going forward, policy will need to be data dependent, with a bias towards loosening.
- Staff views QE as a still-available channel, noting that it would help contain a potential rise in rates and spreads in an environment of continued heavy fiscal borrowing.
- The BoE set to raise its holdings to some 40 percent of the total gilt stock, which could limit space for further QE expansion because financial intermediaries need to hold domestic-currency long-term safe assets.
- The BoE sees negative policy rates as part of its toolkit; market signals (a negative yield curve at times) suggest expectations that this tool could be deployed as the next step, but a fuller assessment is needed covering impact on the UK financial system and potential mitigating measures.
- Other instruments either do not fit the UK context well or are more fiscal in nature and would require coordination with the Treasury.

### Key monetary risks and considerations
- Risks remain to the downside, and there is uncertainty about the net impact of policy changes since March (given a simultaneous decline in the neutral rate).
- With QE purchases pushing BoE gilt holdings toward some 40 percent of the total gilt stock, further balance sheet expansion could be constrained by market needs for long-term safe assets.
- Negative rates: require further study on effectiveness, distributional and financial-sector impacts, and potential mitigating measures before deployment.
- Other monetary measures (yield curve control, broader QE, subsidized loans) have trade-offs or constraints in the UK context (credibility needs, limited room to influence expectations, limited past transmission to bank lending, fiscal implications, and potential financial-stability or governance issues).

### Box 1 — Monetary tools to loosen the stance (summary of findings)
- Negative rates:
  - The ELB is generally thought to be slightly negative; perverse channels (credit and cash hoarding) could be mitigated by tiering of reserves and encouraging banks to apply negative rates to large deposits.
  - Empirical studies find no evidence of a deleterious impact of negative rates on aggregate bank profits.
  - UK smaller banks and building societies could be particularly exposed to the interest margin channel; effects on non-bank financial intermediaries need better study.
- Yield curve control:
  - Makes QE price dependent rather than quantity based; adopted by Australia and Japan targeting 3- and 10-year government bonds respectively.
  - Relies crucially on credibility; may prevent balance sheet normalization for a longer period and current room to influence expectations is limited since the yield curve is already close to zero in the medium run.
- QE extended to assets beyond government bonds:
  - In principle compresses risk premia and improves funding conditions, but purchases of lower-risk assets have not translated into a direct boost to bank lending or corporate investment in the UK or Europe.
  - Purchasing riskier debt securities or equity could be more powerful but risks sowing financial instability and increasing inequality.
- Subsidized loans to banks:
  - BoE currently provides loans conditional on lending targets at rates as low as the policy rate through term funding schemes.
  - Providing loans below the policy rate (as with ECB’s TLTRO III) could encourage bank lending and mitigate damage to profitability from negative rates, but would have fiscal implications and require coordination with the Treasury.

### Banking system: systemic risks and supporting intermediation
- Managing systemic risks:
  - Staff recommended extending dividend payment restrictions to ensure capital remains ample after losses materialize.
  - Potential systemic concern: impact of falling property prices (especially retail and office segments).
  - Close supervision should continue, with attention to mid-cap and smaller banks with narrower business models and higher exposures to risky areas like property prices.
  - Limits on loan-to-value, debt-to-income, and interest coverage ratios should be preserved; risks in this area need to be kept under review.
- Supporting intermediation:
  - Large banks have reasonably strong capital positions per BoE stress tests, and with the release of counter-cyclical capital buffers even more of total buffers are usable.
  - Authorities could help banks put buffers to use by:
    - Clarifying terms and procedures for banks to access state loan-guarantees (to avoid tying up bank resources).
    - Committing to provide ample forward notice on any potential changes to regulatory buffers.
    - Resuming the suspended Annual Cyclical Scenarios (ACS) stress testing and using results to identify weak institutions; ACS are counter-cyclical and should be carefully calibrated to avoid imposing unnecessary procyclical capital increases.

### Authorities’ views (as of discussions ahead of policy decisions)
- Fiscal policy:
  - Authorities emphasized doing whatever it takes on pandemic support, noting recent extensions and enhancements.
  - They placed more emphasis than staff on adapting policies on an ongoing basis rather than commitment/forward guidance, and noted legal constraints to forward guidance (i.e., the budget year).
  - They saw a strong role for public investment, committed to their announced March program, and highlighted expanding focus on climate change mitigation measures; in principle open to scaling up further but capacity and value-for-money processes must be considered.
  - Welcomed recommendation for an externally validated assessment of public investment management systems.
- Monetary policy:
  - In the wake of the November loosening, the BoE views the stance as accommodative and expects inflation to return to target in around two years’ time under the baseline scenario.
  - BoE believes it has sufficient room to maneuver and an array of tools available should further loosening be warranted, though some tools may be less effective close to the lower bound.
  - Negative rates are part of the toolbox but require preparatory operational work and further analysis on transmission through the banking sector.
- Financial sector:
  - BoE views that, reflecting resilience built since the global financial crisis and extraordinary policy responses, the financial system has so far been able to provide support to UK households and businesses.
  - UK banking system remains resilient to a very wide range of possible outcomes and has capacity to continue to support households and businesses.
  - Banks’ buffers exist to be drawn down in stress; BoE will monitor use of capital buffers and assess whether temporary changes to the capital framework may be necessary.
  - A decision on dividends beyond 2020 will be taken in Q4 2020 based on current and projected capital positions, uncertainty about the economy, market conditions, and capital trajectories.

### Policies to facilitate macroeconomic and fiscal adjustment
- Structural shifts:
  - Significant shift in the pattern of production and employment due to Covid and Brexit.
  - Covid and Brexit shocks generally impact different sectors—contact-intensive industries likely to shrink due to Covid, while some manufacturing industries and financial services could experience losses of about 15 percent due to Brexit, with variation across regions.
  - Staff analysis suggests post-Brexit labor reallocation across sectors will likely take several years; during transition the NAIRU could increase above the long-term equilibrium unemployment rate.
  - Scale of corporate restructuring could be very significant: some analysts estimate that by March 2021 around £70 bn of corporate debt (3½ percent of GDP) could be in distress, affecting over 640,000 small and medium sized businesses.
- Policy changes to smooth adjustment:
  - Strengthening the social safety net:
    - The UK system leans towards incentives to return to work; Universal Credit (UC) benefits are below the OECD average for out-of-work replacement ratios.
    - If structural unemployment rises, incentives are less of a concern and cushioning the impact becomes more important.
    - Government could consider:
      - Extending temporary UC (introduced in March) to the post-pandemic phase.
      - Adjusting the level of earnings at which UC starts to be withdrawn and the speed at which UC is withdrawn as earnings rise (allowing greater generosity for in-work recipients while protecting incentives).
      - Improving fairness of housing support under UC by making permanent the link between the level of benefits and rents in the recipient’s area.
    - Making these changes could cost around 0.5 percent of GDP per year and could be financed initially within staff’s proposed envelope for additional fiscal stimulus. Because low-income households tend to have higher propensity to consume, this would be an effective way to help stimulate the economy.
  - Enhancing active labor market policies (ALMPs):
    - Post-GFC cuts left spending on activation policies per unemployed at low levels by international standards.
    - Authorities have launched initiatives to boost job search assistance, expand training and apprenticeships, and subsidize jobs.
    - Further enhancements could focus on supporting the National Retraining Scheme to facilitate adjustment for women, low-income and highly vulnerable workers.
    - Cost of such enhancements could be around 0.1–0.2 percent of GDP per year, financeable initially within the proposed additional fiscal stimulus envelope.
  - Facilitating corporate restructuring:
    - As support schemes sunset, many SMEs may face balance sheet distress (almost 1.5 million sought help under government lending schemes).
    - Cases will range from viable firms needing capital-structure adjustment to non-viable firms that need winding down.
    - Drawn-out case-by-case deleveraging risks creating macroeconomic headwinds; speeding the process requires the right insolvency framework and access to equity finance.
    - The UK introduced a new corporate insolvency and restructuring regime providing greater flexibility, but it still entails significant court involvement, which could be challenging if many firms require processing.
    - Options exist to further streamline the insolvency and restructuring regime and foster new equity investments in viable SMEs.

### Box 2 — Policies to facilitate adjustment in the UK labor market (summary)
- ALMPs should be tailored by recipient type:
  - ALMPs more effective for women, lower-income and vulnerable groups; work-first programs better for disadvantaged participants; human capital programs more effective for long-term unemployed.
  - ALMPs tend to be less effective for placing young and old workers; intensive training should be prioritized for young displaced workers even if payoffs take time.
- Suggested interventions:
  - Expand size of training programs offered by JobCentre Plus (JCP).
  - Develop a statistical-based profiling tool to improve selection of support types.
  - Make basic-skills training mandatory for claimants failing basic skills tests.
  - Make financing available for self-financed training courses and consider expanding existing financing programs (advanced learner program, learner support program, grants and bursaries for adult learners).
  - Explore alternative career paths and support (subsidies, self-employment guidance) for older displaced workers.
  - Consider introducing job-rotation programs (e.g., Denmark model) and establishing an agency modelled on the US’ NASWA to share good practices among JCP district offices.
- Staff cost estimates for proposals:
  - Strengthening UC: around 0.5 percent of GDP per year.
  - Enhancements to ALMPs: around 0.1–0.2 percent of GDP per year.

*International Monetary Fund — United Kingdom country section (excerpts).*

### Box 3. Policies to Facilitate the Reallocation of Capital

### Box 3. Policies to Facilitate the Reallocation of Capital

### Strengthening the corporate insolvency and restructuring regime
- A more standardized and simple out-of-court approach could be introduced to expedite the process given the potentially large number of firms in need of debt restructuring.1
- The government could also consider taking a larger haircut on its claims than private creditors take on theirs (the government has built exposures through deferred tax payments while called guarantees for some creditors will also give it residual claims). The motivation would be to reflect the broader social value of keeping a viable firm in business.2
- Well defined procedures on how defaults in the presence of government guarantees should be treated by lenders, regulators, and the courts could help banks to provision against losses and continue financing the recovery.

### Options to help enterprises rebuild equity
- Temporary conversion of government-guaranteed loans into equity:
  - Loans to struggling firms could convert to non-voting equity for a period of time.
  - The government would obtain a dividend from only those companies able to pay.
  - This measure would give time for companies to get back on their feet and avoid arrears to other debtors and suppliers.
  - At the end of the “equity” period, government shares would convert back to debt at a discounted rate depending on the dividends paid and the remaining value of the company.
  - This scheme could be managed by the British Business Bank.
- Conversion of government-guaranteed debt into future tax liabilities:
  - Under this option, debt to the government would convert into future tax liabilities (i.e., only companies that return to profitability would repay the money owed but as a tax—that is, proportional to profits—rather than as debt).
  - Such a strategy would increase pre-tax profits and reduce debt overhang, thus enabling companies to attract more equity investors.
  - The pros and cons for public finances and the design of the debt-to-tax conversion mechanisms need to be carefully assessed.

### Risk sharing and pooled instruments to mobilize private capital
- Risk pooling of viable companies’ distressed debt:
  - The government, via the British Business Bank, could pool the debt of struggling but viable firms into a portfolio (developing metrics to determine viability).
  - Such debt could be converted into equity and sold in tranches to venture capitalists, private equity firms, and other investors seeking high-yield/high-return opportunities.
- Expansion of the Future Fund:
  - This scheme already exists and provides loans to match new private investments.
  - The debt converts to equity at the end of the loan’s life under certain conditions.
  - This scheme is small compared to the UK’s large population of firms and aggregate investment, but could play some role in assisting distressed firms.
- Pooled asset vehicles:
  - New pools of equity assets that diversify risk sufficiently and meet the regulatory requirements of institutional investors (e.g., insurers and pension funds) could be considered.
  - Some of the requirements limiting insurers and pension funds access to equity investments could be partially relaxed.

*Box 3. Policies to Facilitate the Reallocation of Capital.*

### 34. The UK’s monetary framework has been working well but deserves more frequent

### 34. The UK’s monetary framework has been working well but deserves more frequent

### Monetary framework: assessment and recommendation
- The inflation targeting regime "has provided stability and has kept inflation close to target and expectations well anchored."
- In 2013, the Treasury made explicit that, "in exceptional circumstances, inflation could deviate from target temporarily in order to stabilize output," providing additional flexibility that helped the BoE respond to shocks like Brexit.
- Risks identified:
  - "Low-for-longer interest rates could constrain monetary space, raising risks of lingering inflation undershoots and downward de-anchoring of inflation expectations if shocks occur."
  - The UK has important differences compared with other major central banks, e.g., "a stronger exchange rate channel of monetary policy."
- Recommendation:
  - "Whether the current framework may need adjustment to address the potential problem of prolonged deflationary pressures nonetheless merits consideration."
  - "Introducing a calendar-based schedule of framework reviews, in line with the practice in some peers, might be helpful" to avoid sending unintended signals about likely changes.

### Financial sector regulatory and supervisory framework: strengths, challenges, and priorities
- Strengths:
  - The UK’s bank regulatory framework "was strengthened substantially after 2008."
  - Authorities have implemented several measures to address issues identified in the 2016 FSAP.
- Remaining risks and priorities:
  - AML/CFT risks require mitigation via robust compliance and improved transparency of beneficial ownership information.
  - Establish robust and stable equivalence regimes with the EU, aiming to be "as stable as possible."
    - Suggestion: consider a phase-out approach to revocation of equivalence (e.g., "3 to 6 months prior notice") enshrined in agreements to allow remedial action and private-sector adjustment.
  - Address weaknesses in the non-bank financial system:
    - Recurrence of "dash-for-cash" dynamics indicates (i) some vehicles are treated as perfectly liquid while holding illiquid assets, and (ii) market expectations of a "central bank put."
    - Options: rethink regulation of non-banks and/or introduce a potential formal BoE liquidity facility for non-banks; consider alongside FSB work.
  - Role and usability of bank buffers:
    - Pandemic experience will offer insight into effectiveness and usability of buffers for supporting credit supply.
    - Weak usage of buffers may reflect concerns about payout restrictions (including AT1 coupons), precautionary motives, or insufficient pre-crisis countercyclical buffer increases.
    - These issues can be pursued within the Basel process.
- Near-term supervisory actions:
  - Continue close supervision given SME stress and property price uncertainty.
  - Continue to buttress system funding ability; release of regulatory buffers was appropriate.
  - Extend dividend payment restrictions.
  - Better define trigger points and procedures for activation of government guarantees to avoid tying up bank resources.
- Related processes:
  - Use the ongoing FSB review of non-banks and the IMF FSAP in 2021 to address crisis-uncovered weaknesses.

### Trade openness: strengths, Brexit transition, and trade agreements
- Strengths:
  - "The UK’s open international trade regime has been a source of strength."
- Brexit transition challenges and recommendations:
  - Accelerate implementation of plan to invest in border administration (infrastructure, staff, technology).
  - Strengthen communications and simplify customs processes to guide businesses.
  - Provide targeted support for least prepared businesses (e.g., SMEs) — examples: information on customs declaration forms and registering as a visa sponsor.
  - Remaining financial-sector issues to work through:
    - Avoiding fragmentation of derivative trading.
    - Possible repapering of about "£17 trillion" worth of uncleared derivatives contracts.
    - Completing contractual clauses for transfer of personal data from the EEA to the UK.
    - Ensuring low-value cross-border direct debit payments under SEPA can continue post-Brexit.
- Completing trade agreements:
  - As of "October 21st", the UK had signed or agreed roll-overs on "22 out of 41" existing trade agreements with non-EU countries.
  - These, combined with recent agreements with Canada and Japan, account for "14 percent" of total UK trade ("26 percent of non-EU trade").
  - Authorities focus on agreements with the U.S., "14 countries with which the EU has trade deals (e.g., Mexico)", and other countries (e.g., Australia).
  - Important to preserve a strong role in the WTO and lead in negotiating new WTO-based agreements in services.

### Contingency planning: no-deal Brexit implications and staff guidance
- No-deal scenario characteristics:
  - Outlook would shift toward the staff’s downside scenario with "a longer period of deeper structural transformation and weak demand."
  - Greater need for fiscal policy to cushion hardship and support rebuilding with public investment.
  - With medium-term inflation likely held down, monetary policy would need to remain accommodative, increasing likelihood of deploying other tools (e.g., "a negative policy rate").
  - Financial sector implications: may need action to rebuild capital for some banks due to higher losses.
  - Structural policy needs would be similar but would argue for more aggressive and upfront implementation.
- Key constraint:
  - "A loss of policy space" could occur if market turbulence tightens financing options, limiting immediate fiscal loosening.
  - Credibility of frameworks cannot be taken for granted (example noted: Moody’s concern in September about policy frameworks).
  - Short-run inflation effects from currency depreciation and supply disruptions could raise medium-term inflation expectations, constraining BoE responses.
- Critical near-term actions recommended:
  - (i) Stabilize immediate market turbulence by reassuring about BoE’s ability to provide market liquidity in major currencies if needed, and about sufficiency of system-wide liquidity buffers.
  - (ii) Anchor expectations firmly with appropriate guidance and, if necessary, actions before launching broader policy responses.
  - These actions help mitigate outward spillovers from an unexpected reversion to WTO trading terms on January 1.

### Authorities’ views (summarized)
- Monetary and fiscal frameworks:
  - Authorities consider their monetary and fiscal frameworks to have "performed well."
  - Treasury: fiscal framework is under review; uncertainty argues against early re-imposition of fiscal rules.
  - While acknowledging calendar-based reviews, authorities see "no urgent need to review the [monetary] framework now" given well-anchored inflation expectations and flexibility from the 2013 MPC remit reform.
- Financial sector:
  - Key aims: support an open, globally integrated UK financial sector, foster high international regulatory and supervisory cooperation standards, and promote consumer and market participant interests.
  - BoE remains committed to implementing robust prudential standards in the UK irrespective of future EU relationship; post-pandemic review of experience with international standard-setting bodies is important.
- Trade:
  - Authorities reiterated commitment to complete end-of-transition preparations and progress to date.
  - Businesses and citizens need to prepare as changes are inevitable when leaving the EU single market and customs union.
  - Authorities will work to finalize trade deals and pursue a philosophy of liberalizing and simplifying tariffs.

### Staff appraisal: pandemic impact and policy recommendations
- Economic assessment:
  - Pandemic delivered significant human and economic toll, compounding pre-existing strains from Brexit and low productivity.
  - GDP dropped dramatically; a sharp initial rebound has reversed due to a second Covid-19 wave.
  - Outlook: muted recovery with downside risks; lingering pandemic lifts unemployment and stresses corporate balance sheets.
  - Early deployment of an effective vaccine could offer upside potential.
- Policy response evaluation:
  - Authorities’ aggressive and coordinated fiscal, monetary, and financial measures "have helped mitigate the damage."
  - Costs: sharp deterioration of public sector balance sheet, but borrowing costs fallen and fiscal space remains; private debt rising; banking system remains well-capitalized and liquid.
- Policy recommendations (selected):
  - Continue policy support across fiscal, monetary, and financial dimensions to see the economy through the pandemic and Brexit transition.
  - Fiscal policy:
    - Continue to accommodate ongoing costs of pandemic health, job, and small business support schemes.
    - Keep programs under review; calibrate loan versus grant support correctly.
    - Adjust parameters of job support program to reduce effective subsidy as pandemic impacts decline.
    - Phase out schemes fully as direct pandemic impacts disappear.
    - Additional fiscal push to "build forward better" with public investment to raise productivity, address regional inequalities, and reduce carbon emissions; consider going further if projects are well targeted and managed.
    - Consider an externally validated assessment of the oversight framework using the IMF’s PIMA methodology.
  - Monetary policy:
    - "Should remain accommodative to guard against the risk that projected inflation remains below target."
    - Support for BoE commitment to further government bond purchases.
    - Other tools like negative policy rates could be introduced incrementally if needed; complete assessment on maximizing net impact.
  - Financial sector:
    - Stay alert to emerging stress and buttress system funding ability.
    - Banks should use released regulatory buffers to fund the recovery.
    - Continue close supervision and extend dividend payment restrictions.
    - Better define trigger points and procedures for government guarantee activation.
  - Structural and medium-term policies:
    - Tackle impediments to factor reallocation (labor and capital movement across sectors).
    - Strengthen social safety net, increase ALMP spending, streamline out-of-court insolvency, and unlock new sources of equity for SMEs.
    - Policy rotation toward fiscal adjustment in the medium term once private sector durably leads recovery; consolidation should be gradual.
    - Re-launch a full spending review in 2021 and re-examine the pension triple lock; some adjustment of major tax rates likely inevitable.
    - Maintain policy anchors within robust frameworks; adopt a new medium-term fiscal anchor and annual targets to support fiscal sustainability.
- Trade:
  - Agreement on a new post-Brexit trade regime would be beneficial for both sides; finalize preparations for implementation.
  - Government needs to deliver on investment in border infrastructure, staff, technology, and the customs intermediary sector.
  - Stronger communications and direct assistance for SMEs are particularly helpful.
  - If WTO terms ensue, authorities should keep expectations anchored, pursue more aggressive demand support, and more rapidly implement policies to facilitate structural transformation.

*INTERNATIONAL MONETARY FUND*

### 52. It is recommended that the next Article IV consultation be held on the standard

### 52. It is recommended that the next Article IV consultation be held on the standard 12-month cycle.

### High-Frequency Activity Indicators
- Activity indicators shown relative to March 2, 2020 (percent): electricity power actual load; cargo; manufacturing; Barclays composite retail footfall; Google visits to Grocery & Pharmacy; OpenTable; composite pub transit indicator; Apple mobility trends (visits: workplaces; visits: retail & recreation; visits: transit stations).
- Sources: Haver Analytics, Barclays Research, IMF staff calculations.

### Recent Macroeconomic Developments (findings)
- Investment Growth (Yoy percent change) and components: Total, Manufacturing, Services (charts through 2020:Q3).
- Real Income and Consumption Growth (Percent) through 2020:Q3.
- Output gap (percent of potential GDP) and Unemployment Rate (percent, rhs) with 2020 projections.
- Cross-country Real GDP index (2019:Q4=100) for 2019:Q4, 2020:Q1, 2020:Q2, 2020:Q3: France, Germany, Italy, Spain, UK, US.
- Key narrative findings:
  - "Consumption plummeted due to social distancing..."
  - "...and so did investment amidst high uncertainty."
  - "Potential growth had already been slowing down before Covid."
  - "The pandemic led to a relatively large contraction in the UK. With high-contact services being harder hit."
  - "The furlough scheme muted the unemployment hike, but substantial slack is estimated."
- Potential output growth series: 2000–2018 (chart).

### Inflation
- CPI and Core CPI (Percent change, yoy) series through Oct-2020.
- Headline inflation: "has dipped below the target.... driven by cheaper energy and subdued core prices."
- Labor productivity and real wage: GVA per worker and nominal measures (Percent) through 2020:Q3; "Labor productivity tanked with the lockdown... implying a spike in the unit labor cost."
- Unit Labor Cost (4q moving average) (Percent change, yoy) 2020:Q2.
- Contributions to CPIH Inflation (percent) Oct-2020: Energy; High import content 1/; Other domestic 2/; Core services.
- Footnotes:
  - 1/ Derived from government securities, assuming RPI inflation exceeds CPI inflation by 1 percentage point.
  - 2/ Labor cost (per worker) over productivity.

### Labor Market Developments
- Okun's Law (annual data 1900–2019): fitted relation y = -0.321x + 0.6628, R² = 0.4689; chart includes 2020:Q3.
- Total Actual Weekly Hours Worked and Total in Employment (yoy percent change) through 2020:Q3.
- Employment composition (yoy percent change) 2012–2020: Total in Employment; Total in Employees; Total in Self-employed.
- Labor Participation Rate (Percent, by age group) 2010–2020 for age groups 16+, 16-24, 65+ (rhs).
- Contributions to Change in Unemployment Rate (Percentage point): Feb-20, Apr-20, Jun-20, Aug-20: Workers temporarily away from paid work; Empl. excl. workers temp. away from paid work; Labor force; Unemployment rate (rhs).
- Total Unemployed, Unemployment Claimant Count, Job Vacancies (millions, seasonally adjusted) through 2020:Q3.
- Narratives:
  - Furlough scheme and temporary away-from-work dynamics influenced unemployment measures.

### External Sector
- NIIP and Effective Exchange Rates: NIIP (percent of GDP), NEER (index, rhs), REER (index, rhs) 2000–2020:Q2.
- Key findings:
  - "The current account deficit was financed by FDI and portfolio debt inflows."
  - "The NIIP stayed at end-2019 levels in 2020Q2, with effective exchange rates at the 2019 average."
  - "Net exports having a neutral contribution to growth."
  - "The primary income balance remained above -2 percent."
  - "The current account was broadly unchanged in 2019..."
- Primary Income Balance (Percent of GDP) 2000–2019 with components: Compensation of Emp.; Earnings on FDI; Equity Securities; Debt Securities; Other Investment in UK; Reserve Asset; Other Primary Income Balance.
- Saving-Investment Balance by sectors (Percent of GDP) 2000–2020: Private NFC; FC; Government; Public NFC; Household Net balance.
- Financing the Current Account (Percent of GDP) 2000–2019: FDI; Equity; Debt; Derivatives; Reserve FA, rhs.
- Change in Current Account Balance (Percent of GDP) 2000–2016 with TB Primary inc. Secondary inc. CA.
- Contributions to Growth from Trade (Percentage points) 2005–2019: Imports of Goods; Imports of Services; Exports of Services; Exports of Goods.
- Narrative: "The S-I balance increased in 2020H1, with household saving absorbing government borrowing."

### Implementation of Past Fund Advice (IMF 2018 Article IV Selected Recommendations)
- Monetary Policy:
  - Recommendation: "A modest further tightening of monetary policy over the next two years would likely be needed..."
  - Action: Policy rate was held at 0.75 percent; Bank of England’s pre-pandemic forecast assumed interest rate would rise moderately over the medium term.
- Fiscal Policy:
  - Recommendation: "Steady fiscal consolidation to comply with the government’s fiscal framework."
  - Actions/Outcomes:
    - March 2020 budget envisaged a structural deficit of 2.4 percent of GDP in 2020–21, missing the legislated fiscal mandate by 0.4 percent of GDP in part due to accounting changes for student loans.
    - Public sector net borrowing projected to remain in deficit in 2025, missing the balanced budget objective.
    - Debt projected to fall by 2.1 percent of GDP in 2020–21, meeting the supplementary debt target.
    - Welfare spending assessed by OBR to be within the cap.
    - March 2020 budget met all Budget 2020 manifesto targets (1, 2, 3 listed in text).
    - Chancellor indicated intention to review the fiscal framework in Autumn 2020 budget.
  - Other recommendations with limited or no progress:
    - Finance higher (pre-Covid) public health spending with new revenue and/or offsetting spending cuts — "limited progress".
    - Eliminate the “triple lock” on public pensions — "limited progress".
    - Explore efficiency gains in health care provision — "limited progress".
    - Revenue measures likely needed; "There has been no plan for raising the three major tax rates in the medium term."
- Structural Policies:
  - Increase public spending on infrastructure — March 2020 budget announced £640bn of gross capital investment over 2020–2025.
  - Facilitate flexible work arrangements and close the gender pay gap — "[.]"
  - Facilitate structural shift due to Brexit — "[.]"
  - Promote housing supply by easing planning restrictions — government proposed to reform planning system to streamline the process.
  - Higher investment in R&D — March 2020 Budget planned to increase public R&D investment to £22bn per year by 2024–25.

### Selected Economic Indicators, 2015–21 (key figures)
- Real GDP (change in percent): 2015: 2.4; 2016: 1.7; 2017: 1.7; 2018: 1.3; 2019: 1.3; 2020: -11.2; 2021: 5.7.
- Private final domestic demand: 2015: 3.7; 2016: 3.7; 2017: 1.4; 2018: 1.2; 2019: 0.9; 2020: -14.8; 2021: 4.5.
- CPI, end-period: 2015: 0.1; 2016: 1.2; 2017: 3.0; 2018: 2.3; 2019: 1.4; 2020: 0.7; 2021: 1.7.
- Unemployment rate (ILO): 2015: 5.4; 2016: 4.9; 2017: 4.4; 2018: 4.1; 2019: 3.8; 2020: 4.8; 2021: 7.3.
- Public sector overall balance (fiscal year, percent of GDP): 2015/16: -4.2; 2016/17: -2.6; 2017/18: -2.6; 2018/19: -1.8; 2019/20: -2.5; 2020/21: -19.1; 2021/22: -7.6.
- Public sector net debt 2/ (end of fiscal year using centered-GDP): 2015: 78.7; 2016: 77.6; 2017: 81.1; 2018: 79.9; 2019: 84.6; 2020: 106.4; 2021: 109.9.
- Current account balance (percent of GDP): 2015: -5.0; 2016: -5.4; 2017: -3.8; 2018: -3.7; 2019: -4.3; 2020: -2.6; 2021: -4.2.
- Exchange rate (Bilateral rate September 8, 2020): US$1 = £0.7679.

### Medium-Term Scenario, 2015–25 (selected projections)
- Real GDP (percent): 2020: -11.2; 2021: 5.7; 2022: 4.6; 2023: 2.0; 2024: 1.9; 2025: 1.7.
- Real domestic demand: 2020: -13.4; 2021: 8.3; 2022: 4.7; 2023: 1.9; 2024: 1.9; 2025: 1.7.
- Private consumption: 2020: -14.4; 2021: 5.0; 2022: 7.0; 2023: 2.0; 2024: 1.5; 2025: 1.5.
- Gross national saving (percent of GDP): 2020: 14.4; 2021: 12.5; 2022: 13.4; 2023: 13.8; 2024: 14.1; 2025: 14.2.
- Current account (percent of GDP): 2020: -2.6; 2021: -4.2; 2022: -4.1; 2023: -3.9; 2024: -3.7; 2025: -3.6.
- CPI Inflation, period average: 2020: 0.9; 2021: 1.2; 2022: 1.8; 2023: 2.0; 2024: 2.0; 2025: 2.0.
- Output gap (percent of potential): 2020: -5.3; 2021: -4.2; 2022: -1.8; 2023: -1.0; 2024: -0.3; 2025: -0.1.
- Employment: 2020: -1.0; 2021: -2.7; 2022: 1.7; 2023: 1.1; 2024: 1.0; 2025: 0.7.
- Unemployment rate (percent, period average, LFS): 2020: 4.8; 2021: 7.3; 2022: 6.1; 2023: 5.2; 2024: 4.5; 2025: 4.2.
- Household saving rate 7/ (percent): 2019: 6.5; 2020: 18.2; 2021: 13.7; 2022: 8.2; 2023: 7.0; 2024: 6.9.

### Statement of Public Sector Operations, 2017/18–2025/26 (select staff projections)
- Revenue (percent of GDP): 2020/21: 37.6; 2021/22: 37.5; 2022/23: 37.6; 2023/24: 38.3; 2024/25: 39.0; 2025/26: 39.5.
- Taxes (percent of GDP): 2020/21: 26.3; 2021/22: 26.7; 2022/23: 27.6; 2023/24: 28.2; 2024/25: 28.8; 2025/26: 28.7.
- Expenditure (percent of GDP): 2020/21: 58.9; 2021/22: 45.4; 2022/23: 43.9; 2023/24: 43.5; 2024/25: 43.3; 2025/26: 43.3.
- Net lending/borrowing (overall balance) (percent of GDP): 2020/21: -21.3; 2021/22: -7.9; 2022/23: -6.3; 2023/24: -5.2; 2024/25: -4.3; 2025/26: -3.8.
- Public sector net debt 2/ (percent of GDP, end of fiscal year): 2019/20: 85.0; 2020/21: 111.5; 2021/22: 110.7; 2022/23: 112.4; 2023/24: 113.6; 2024/25: 114.1; 2025/26: 115.0.
- Memo: Nominal GDP (in billions of pounds) 2020/21: 2,025; 2021/22: 2,173; 2022/23: 2,298; 2023/24: 2,394; 2024/25: 2,484; 2025/26: 2,574.

### Balance of Payments, 2016–25 (selected)
- Current account (percent of GDP): 2016: -5.4; 2017: -3.8; 2018: -3.7; 2019: -4.3; 2020: -2.6; 2021: -4.2; 2022: -4.1; 2023: -3.9; 2024: -3.7; 2025: -3.6.
- Trade in goods (percent of GDP): 2020: -4.7; 2021: -6.2; exports (percent of GDP) 2020: 15.0; imports 2020: -19.7.
- Primary income balance (percent of GDP): 2019: -1.7; 2020: -2.1; receipts/payments series provided.
- Financial account (percent of GDP): 2019: -4.9; 2020: -2.7; projections through 2025.

### Net Investment Position, 2015–25 (percent of GDP)
- Net investment position: 2015: -25.2; 2016: -1.9; 2017: -13.9; 2018: -15.1; 2019: -26.2; projections: 2020: -28.6; 2021: -30.2; 2022: -31.3; 2023: -32.3; 2024: -33.0; 2025: -33.7.
- Assets and liabilities levels (percent of GDP) and component series (Direct investment, Portfolio investment, Financial derivatives, Other investment, Reserve assets) provided.
- Memorandum: Change in the net investment position: -2.5; 22.4; -12.1; -1.6; -11.5; -1.0; -2.6; -2.5; -2.2; -2.0; -1.9.
- Note: projections assume valuation gains of 1.7 percent of GDP per year.

### Financial Soundness Indicators (2010–2019Q3) — highlights
- Regulatory Capital to Risk-Weighted Assets: 2010: 15.9; 2019Q3: 21.0.
- Regulatory Tier 1 Capital to RWA: 2010: 13.2; 2019Q3: 17.6.
- Non-performing Loans to Total Gross Loans: 2010: 4.0; 2019Q3: 1.0.
- Return on Assets: 2010: 0.3; 2019Q3: 0.4.
- Return on Equity: 2010: 6.9; 2019Q3: 6.5.
- Liquidity: Liquid Assets to Total Assets (Liquid Asset Ratio): 2010: 21.0; 2019Q3: 23.5.
- Customer Deposits to Total (Non-interbank) Loans: 2010: 106.2; 2019Q3: 122.9.
- Gross Asset and Liability Positions in Financial Derivatives to Capital show large magnitudes across the period (e.g., Gross Asset Position 2019Q3: 531.0; Gross Liability Position 2019Q3: 523.2).

### Monetary Policy Frameworks (Policy options, pros/cons, and UK-specific issues)
- Price Level Targeting:
  - Pro: systematic forward guidance.
  - Con: time inconsistent commitment; may require large ex-post price level corrections with output stabilization costs.
  - UK issue: large exchange rate pass-through and protracted exposure to persistent terms of trade shocks could be particularly problematic.
- Average Inflation Targeting:
  - Pro: more flexible than price level targeting; past inflation realizations are forgotten after a window.
  - Con: calibration critical; mechanical rules could delay policy loosening in recessions; discretionary implementations could obscure communication.
  - UK issue: current conjuncture of successive shocks not propitious for measures constraining policy flexibility.
- Nominal GDP Targeting:
  - Pro/Con: variant of price level targeting that puts more weight on output stabilization.
  - UK issue: counterproductive in the face of negative supply shocks; supply shocks are relevant given Brexit and potential reshoring of supply chains.
- Higher Inflation Target:
  - Rationale: some studies prescribe higher average inflation because the ELB is more binding.
  - Trade-offs: a small rise (e.g., to 3 percent) may be insufficient; higher rise increases real costs of inflation.
  - UK context: UK has largely avoided inflation undershoots seen elsewhere, making an update less of a priority.

### Status of Implementation of the 2016 FSAP Recommendations (As of July 2020) — selected items
- Financial Stability Policy Framework:
  - Extend FPC powers of direction to the buy-to-let market — Implemented (legislation early 2017).
  - Extend perimeter of concurrent stress tests to cover large foreign subsidiaries — Not Implemented; BoE views entity-level tests as most informative and coordinates with home supervisors.
  - Complete core data template and enhance analytical infrastructure for concurrent stress tests — In progress; BoE ACS data strategy and data review for 2022 stress test.
  - Develop interconnectedness indicators using flow of funds data — In progress; BoE, FCA, ONS engaged in Enhanced Financial Accounts project; BoE work on simulating stress (FS Paper #42; Staff Working Papers 803 and 809).
- Financial Sector Oversight:
  - Increase supervisory intensity on less systemically important banks — Implemented; PRA increased resources and completed thematic reviews; consultation on supervisory approach to growing firms published in 2020.
  - Broaden review of bank internal models — Implemented; PRA aims to review at least 60 percent of modelled credit risk RWAs and complete mortgage exposure program by 2021 and other asset classes by 2022.
  - Introduce supervisory colleges and arrangements for insurers with significant non-EEA business — Implemented.
- Financial Markets Infrastructures:
  - Transfer of HVPS delivery to BoE and RTGS self-assessment — Implemented; BoE became HVPS scheme operator; RTGS self-assessment completed and published.
  - De-tiering project for payment systems — Partly implemented; increase in CHAPS and Faster Payments direct participants; further work likely medium-term due to RTGS rebuild.
- Crisis Management and Resolution:
  - Operating principles for funding of firms in resolution — Implemented; public backstops include SMF and Resolution Liquidity Framework; BoE Purple Book published October 2017.
  - Resolution regime for systemic insurers — Partly implemented; BoE engagement with FSB and IAIS material; work ongoing.
  - Establish approach for engaging with non-CMG countries where UK banks/CCPs have systemic presence — Partly implemented; CMGs established for two UK CCPs (LCH Ltd., ICE Clear Europe); work at initial stage of resolution planning.

### Anti-Corruption Efforts (Authorities’ Self-Assessment)
- Corporate Transparency:
  - Government to introduce verification of identities of people holding certain roles in corporate entities; since start of 2020, obliged entities required to report discrepancies on PSC register.
  - 2020 legislation expanded register of trusts beneficial ownership; draft Bill to establish register of beneficial owners of overseas entities owning UK property.
  - Proposed condition to make beneficial ownership information a condition of awarding central government procurement contracts.
- OECD Working Group Recommendations:
  - National Economic Crime Centre (NECC) established October 2018; coordinates de-confliction of foreign bribery cases through FB Clearing House.
  - Recommendations to maintain SFO role in foreign bribery and improve inter-jurisdictional enforcement capacity implemented.
  - Recommendations to enhance AML reporting framework, strengthen engagement with CDBOT, and review HMRC capacity to detect/report foreign bribery partially implemented.
  - Outstanding elements remain on interagency cooperation and safeguarding independence of investigations and prosecutions.
- International Anti-Corruption:
  - UK hosts IACCC and will improve fast-time intelligence sharing; IACCC has new affiliate members to assist with detecting PEP corruption.
  - On anti-foreign bribery, UK has fully or partially implemented 34 of 44 OECD Phase 4 recommendations per OECD working group on bribery.

### COVID-19: Initial Measures and Measures in Effect at Time of Writing (selected items)
- Fiscal support for health: Additional funds for health services — One-off; further additions to health spending — One-off.
- Support for households:
  - Increase of Universal Credit (UC), Working Tax Credit and housing allowance — Until end-March 2021; "No further changes."
  - Transfers to clinically vulnerable people — One-time payment; "No further changes."
  - Suspension of Minimum Income Floor for self-employed claiming UC — Until end-November (extended until end-April 2021).
  - Payment to low income people told to self-isolate by NHS Test and Trace — Until end-January 2021.
- Support for jobs:
  - Coronavirus Job Retention Scheme (furlough): coverage starting at 80% of wages, declining to 60% in October; March–October initially; Extended with 80% replacement for non-worked hours until end-March 2021.
  - Self-Employment Income Support Scheme: initial two 3-month tranches covering first 80% and later 70% of trading profits; additional two 3-month tranches, first set at 80% (up to £7,500), second to be defined; Until end-April 2021.
  - Kickstart scheme subsidizing wages of young employees at risk: Until end-June 2021.
  - Restart program: one program for 3 years.
- Support for firms:
  - Grants for small firms and firms in hospitality, retail and leisure: One-time payments; new grants for businesses closed due to restrictions, computed for 2-week periods while restrictions last.
  - Business rates relief for affected sectors: FY2020; no further changes.
  - Deferral of VAT payment for Q2 2020 until end-March 2021; payments in installments allowed until end-March 2022.
  - Deferral of July self-assessment tax payment until end-January 2021; Time to Pay payment plan allows installments until end-March 2022.
  - Government guaranteed loan schemes:
    - Bounce Back Loans scheme with 100% guarantee. Loans up to £50,000. Initially until November 4; application period extended until end-January 2021; maturity extended up to 10 years; loan top-up allowed.
    - CBILS with 80% guarantee for smaller firms. Loans up to £5 million. Initially until September 23; application period extended until end-January 2021.
    - CLBILS with 80% guarantee for large firms. Loans up to £200 million. Initially until October 20; application period extended until end-January 2021.
  - Purchase of commercial paper of investment grade firms (CCFF, BoE-operated): Until end-March 2021; technical updates of firm qualifications.
  - Convertible loans (Future Fund): Until end-September; application period extended until end-January 2021.
  - Trade credit reinsurance facility: Until end-December; no further changes.
  - Commercial eviction moratorium protecting commercial tenants from eviction risk: Until end of 2020; no further changes.
- Measures to reinvigorate the economy:
  - Green Home grants to make homes energy efficient — Until end-March 2021.

*Source: IMF staff report content as provided in the submitted PDF excerpt.*

### Annex I. Measures in Response

### Annex I. Measures in Response to Covid-19 Outbreak — UNITED KINGDOM

### Fiscal measures
- Additional funds to improve energy efficiency of public sector buildings. Duration: One off
- Temporary reduction of stamp duty on real estate transactions. Duration: July 2020–March 2021
- Temporary reduction of VAT from 20 to 5% on food, accommodation and attractions. Duration: End-March 2021
- Eat out to help out program subsidizing meals at participating businesses. Duration: August 2020

Notes:
- 1/ Covers measures introduced prior to the Plan for Jobs announced on July 8, 2020.
- 2/ As of November 30, 2020.

### Monetary policy and central bank facilities
- Policy rate reduced by 65bps to 0.1 percent. Status: No further changes.
- Quantitative easing program expanded by £300bn. Status: Additional expansion by £150bn.
- Term Funding Scheme with additional incentives for lending, and especially SMEs. Maturity of loans extended to up to 10 years.
- Temporary extension of Ways & Means facility, yet to be used by government. Duration: While Covid disruptions last. Status: No further changes.
- Activated Contingent Term Repo Facility. Duration: While conditions last. Status: Discontinued.
- Coordinated action with major central banks to offer dollar liquidity at more favorable terms.

### Financial sector measures and supervisory actions
- Reduced the countercyclical buffer rate to 0 from a path toward 2 percent by 12/2020, and associated reduction in the countercyclical leverage ratio buffer. Duration: For at least 12 months. Status: No further changes.
- Canceled outstanding 2019 dividends; and halted cash bonuses to senior staff. Duration: Until end-December. Status: No further changes.
- Pillar 2A requirements to be set as a nominal amount (instead of percentage of RWA). Duration: Expires end-2021. Status: No further changes.
- Implementation of the Basel 3.1 leverage ratio treatment of the exposure value of regular-way purchases and sales awaiting settlement. Duration: n/a. Status: No further changes.
- Exclusion of BBLs from the leverage exposure measure. Duration: n/a. Status: No further changes.
- Maintain Systemic Risk Buffer Rates set in December 2019. Reviewed in December 2021 to come into effect January 2023.
- Temporarily allow firms to offset the increase in risk-weighted assets due to the automatic application of a higher VaR multiplier against UK-specific modelling capital requirements. Duration: Reviewed after 6 months. Status: Terminated from 30 September 2020 in light of amendments to the legislation in the EU to address the issue directly.
- Payment deferrals on mortgage and consumer credit. Initial Duration: Until end-October. Status: Extended. New Duration: Until end-March 2021.

Notes:
- 3/ The measures taken by the PRA in the table above were also accompanied by measures to reduce the operational burden on firms during the crisis period and by guidance to support firms’ implementation of policy, which can be found at this link: https://www.bankofengland.co.uk/coronavirus/information-for-firms.

*Source: 1gbrea2020001 - Annex I. Measures in Response to Covid-19 Outbreak.*

### 0.9 percentage point higher than the baseline). Given the long maturity of UK’s debt the impact

### UNITED KINGDOM

### Baseline projections and debt path
- Debt-to-GDP ratio:
  - Nominal gross public debt: 85.2 (2018), 90.6 (2019), 96.0 (2020), 118.4 (2021), 121.2 (2022), 123.1 (2023), 123.2 (2024), 118.4 (2025), 117.9 (projection entries shown in figure).
- Public gross financing needs: 11.6 (2018), 9.4 (2019), 9.6 (2020), 26.0 (2021), 15.6 (2022), 14.5 (2023), 13.4 (2024), 13.7 (2025), 14.1 (additional projection entry).
- Real GDP growth (in percent): 1.5 (2018), 1.4 (2019), 0.3 (2020), -12.6 (2021), 10.3 (2022), 2.9 (2023), 2.1 (2024), 1.8 (2025), 1.6 (projection entries).
- Inflation (GDP deflator, in percent): 1.7 (2018), 2.3 (2019), 2.4 (2020), 6.4 (2021), -3.1 (2022), 1.1 (2023), 1.9 (2024), 2.2 (2025), 2.2 (projection entries).
- Nominal GDP growth (in percent): 3.6 (2018), 3.3 (2019), -3.3 (2020), 0.6 (2021), 5.6 (2022), 3.6 (2023), 4.2 (2024), 3.9 (2025), 3.8 (projection entries).
- Effective interest rate (in percent): 2.8 (2018), 2.0 (2019), 1.9 (2020), 1.2 (2021), 0.6 (2022), 0.7 (2023), 0.8 (2024), 0.9 (2025), 1.2 (projection entries).
- Primary balance and fiscal aggregates:
  - Primary (noninterest) revenue and grants: 36.2, 37.0, 38.7, 35.9, 37.2, 36.9, 37.6, 38.1, 38.6 (cumulative 224.4).
  - Primary (noninterest) expenditure: 40.2, 37.3, 40.0, 53.4, 44.0, 41.4, 41.1, 40.9, 41.0 (cumulative 261.9).
  - Primary deficit contributions: 3.9, 0.3, 1.3, 17.5, 6.8, 4.5, 3.5, 2.8, 2.4 (cumulative 37.5).
- Change in gross public sector debt (cumulative/projections): 4.0, -1.0, 5.4, 22.4, 2.8, 1.8, 0.1, -4.8, -0.5 (cumulative 21.9).
- Identified debt-creating flows (cumulative/projections): 4.9, -1.6, -0.9, 30.5, 1.7, 1.4, 0.4, -4.6, -0.3 (cumulative 29.1).

### Scenario analyses (stress tests and alternative scenarios)
- Exchange rate shock:
  - Assumes depreciation of 20 percent for FY21.
  - Debt is denominated in local currency; a depreciation reduces debt ratio due to a denominator effect of higher nominal GDP, only partially offset by higher spending on inflation-linked payments.
  - Stock of index-linked gilts represents about 25 percent of debt and is sensitive to RPI inflation.
- Combined macro-fiscal scenario:
  - Aggregates shocks to real growth, the interest rate, and the primary balance.
  - Under these assumptions, debt-to-GDP remains upward through the forecast, reaching almost 128 percent of GDP in FY25.
  - Gross financing needs remain below the 20 percent of GDP threshold.
- Contingent liability shock:
  - Assumes a one-time bailout raising non-interest expenditure by 3 percent of banking sector assets in FY21 (also interpreted to cover pandemic-related government guarantees ≈ 3 percent of GDP).
  - Real GDP reduced by one standard deviation for two years.
  - Under this scenario, debt-to-GDP rises to about 138 percent of GDP in FY21 and reaches 133 of GDP in FY25.
  - Gross financing needs would exceed the 20 percent of GDP threshold in FY21.
- Additional stress test outcomes (selected):
  - Primary Balance Shock, Real GDP Growth Shock, Real Interest Rate Shock, Real Exchange Rate Shock, Combined Shock, Contingent Liability Shock are modeled with their respective paths for Real GDP growth, Inflation, Primary balance, and Effective interest rate as shown in the stress-test figures.

### Debt composition and financing structure
- Composition of public debt by maturity:
  - Average maturity of debt remains among the highest at 15 years.
  - Recent issuance has included more at shorter maturities.
- Currency composition:
  - The public debt is primarily local currency-denominated; foreign-currency denominated share shown in composition charts.
- Public gross financing needs and market indicators:
  - Market conditions: very low funding costs, strong demand for gilts, declining CDS spreads since March.
  - BOE quantitative easing projected to absorb most net new issuance over the next 12 months.
  - Temporary extension of BOE’s Ways and Means facility serves as a precautionary tool (not used to date).

### Assessment of financing risks and fiscal space
- Macro-fiscal context:
  - Real GDP growth projected to contract by about 11 percent in 2020.
  - GDP projected to remain about 5 percentage points below pre-Covid trend by 2025.
  - Overall public sector balance projected at around 19 percent of GDP in FY2020.
  - Deficit expected to decline to about 7½ percent of GDP next fiscal year and to about 3.3 percent of GDP in 2025 assuming gradual consolidation starting in FY2023.
  - Net public sector debt projected to climb from 85 percent of GDP at end-FY2019 to over 106 percent of GDP in the current fiscal year and stabilize around 108 percent of GDP over the medium term (considering unwinding of the TFS scheme in FY24 and FY25).
- Fiscal space:
  - Current macroeconomic context provides some space for policy actions; fiscal multipliers projected to be high in environment of low interest rates and high unemployment.
- Availability of financing and debt sustainability:
  - Financing availability is ample despite elevated GFN-to-GDP ratios; additional analysis indicates moderate risk of stress given large domestic financial sector capacity.
  - Assessment: the government is expected to preserve robust market access; debt assessed to be sustainable both under the baseline and under a scenario with sustained higher fiscal deficit and later/ slower adjustment.
- Gross Financing Index (GFI) and risk signal:
  - Indicator weights and values:
    - Average GFN/GDP, baseline projections weight 0.35 → 13.9
    - Initial bank claims on government/assets weight 0.32 → 3.6
    - Change in bank claims on govt in stress weight 0.33 → 11.1
  - Total index: 9.7 → Signal: Moderate risk
  - Thresholds: High-Moderate 17.9; Moderate-Low 7.6
  - Memo: Sterling Bank assets/GDP 187.4%
- Policy-relevant operational points:
  - BOE quantitative easing projected to absorb most net new issuance over next 12 months, supporting issuance strategy at long maturities.
  - Temporary extension of BOE’s Ways and Means facility retained as precautionary tool to smooth financing.

*Source: IMF staff.*

### 7.      Fiscal adjustment requirements are achievable. The large reduction of the fiscal deficit

### 7.      Fiscal adjustment requirements are achievable. The large reduction of the fiscal deficit

### Fiscal adjustment requirements and assessment
- The large reduction of the fiscal deficit envisaged for F2021 reflects the expiration of the extraordinary support provided in the current year.
- Further consolidation of around 2 percent of GDP in structural terms would be needed going forward to stabilize public debt (albeit at a high level), and more to start reversing the recent increase in debt.
- By comparison, the consolidation implemented in the UK after the GFC was 6.5 percent of GDP.
- This magnitude of adjustment is also not infrequent by international comparison (Figure 3 of Annex III).

Assessment
- The UK is assessed to have some fiscal space.
- With the public debt expected to remain at high levels, expansionary fiscal policies in the near term to support the economy will need to be anchored by a credible medium-term fiscal framework and a credible fiscal consolidation plan.
- The UK has favorable characteristics in implementing its fiscal objectives, including:
  - a strong macroeconomic and fiscal forecasting capacity,
  - a long-standing and credible medium-term budget framework,
  - the OBR provides an independent and clear assessment of whether the government is meeting its fiscal objectives, strengthening the credibility of the framework.

### Annex V. External Sector Assessment — Overall Assessment and potential policy responses
- Overall Assessment: The external position in 2019 was weaker than the level implied by medium-term fundamentals and desirable policies.
- The CA deficit remained high in 2019, reflecting low public and private saving.
- The uncertainty around this assessment is significant, reflecting both measurement issues and uncertainty about the future trade arrangement with the European Union and its possible effect on growth and trade flows.
- On a preliminary basis, and adjusting for transitory factors, recent developments suggest a broadly unchanged overall external position in 2020 compared to 2019.
- This assessment is highly uncertain given the lack of full year data for 2020 and the Covid-19 crisis; a complete analysis will be provided in the 2021 External Sector Report.

Potential Policy Responses
- Macroeconomic policies in the short term (2020–21) should focus on supporting the economy, addressing the impact of the coronavirus, and facilitating the recovery.
- Structural reforms, including those focused on broadening the skill base, should be pursued to boost the United Kingdom’s productivity and international competitiveness.
- These efforts are particularly important in light of expectations that access to the EU market will become more restricted.

### Foreign Asset and Liability Position and Trajectory
Background
- The NIIP declined to –25.2 percent of GDP in 2019 from –12.8 percent of GDP in 2018, to a large extent due to the pound’s appreciation.
- Over the past five years, the NIIP has declined by 2.5 percentage points, reflecting a negative CA contribution (–19.7 percentage points) largely offset by valuation and growth effects (13.7 percentage points and 3.6 percentage points, respectively).
- The composition of assets roughly matches that of liabilities (about 86 percent of GDP in FDI, 70 percent of GDP in equity instruments, about 98 percent of GDP in derivatives—about ¾ linked to interest rates and ¼ to exchange rates—and about 183 percent of GDP in other investment), although portfolio investment liabilities (167 percent of GDP) exceed assets in portfolio investments (126 percent of GDP).
- The United States, other European countries, and Japan account for about 75 percent of total UK external assets and liabilities, and external liabilities have a larger share denominated in pounds than assets.
- The IMF staff projects the NIIP to decline over the medium term, although the large and volatile valuation effects make these estimates particularly uncertain.

Assessment
- Despite some decline, the sustainability of the NIIP is not an immediate concern.
- Since 2000, valuation gains have offset about 40 percent of the effect of CA flows on the IIP, partially reflecting CA measurement issues and depreciation of the pound.
- Fluctuations in the large gross stock positions are a potential source of vulnerability (including derivatives, gross assets and gross liabilities both exceed 500 percent of GDP).

Key statistics (2019 (% GDP))
- NIIP: –25.2
- Gross Assets: 508.6
- Debt Assets: 250.7
- Gross Liab.: 533.8
- Debt Liab.: 288.0

### Current Account
Background
- The CA deficit narrowed marginally to –3.8 percent of GDP in 2019 (from –3.9 percent in 2018) and remains significantly larger than its historical average.
- The wider CA deficits since the global financial crisis reflect mostly weaker income balance, due in part to lower earnings on the United Kingdom’s FDI abroad (especially in the euro area).
- In 2019, a slight rise in the trade balance was offset by a slight fall in the income balance.
- The CA deficit is projected to decline to 2.6 percent of GDP in 2020 due to a narrower trade deficit, including a reduction in net tourism spending, as domestic demand is projected to fall by more than in trade partners. This reflects a sharp fall in investment combined with a slight increase in gross saving (relative to GDP).

Assessment
- The EBA CA model estimates a norm of 0.4 percent of GDP and a cyclically adjusted EBA CA gap of –4.2 percent of GDP.
- The CA is assessed to be understated due to measurement biases, partly reflected in the large NIIP exchange rate valuation effects and in other unidentified stock-flow adjustments.
- Important sources of bias:
  - retained earnings on portfolio equity assets, not recorded on an accrual basis—estimated at about 0.8 percent of GDP,
  - the unrecorded impact of expected inflation differentials on the CA—estimated to be about 0.5 percent of GDP.
- Overall, the IMF staff assesses the CA gap in the range of –0.9 to –4.9 percent of GDP. This range takes into account uncertainty related to the outcome of the negotiations on the future UK-EU relationship and possible measurement issues.

Key statistics (2019 (% GDP))
- Actual CA: –3.8
- Cycl. Adj. CA: –3.8
- EBA CA Norm: 0.4
- EBA CA Gap: –4.2
- Staff Adj.: 1.3
- Staff CA Gap: –2.9

### Real Exchange Rate
Background
- The pound remained unchanged in real effective terms in 2019 relative to its average level in 2018 but has depreciated since mid-2016 by about 6 percent.
- Sterling depreciation since 2016 may reflect an unwinding of past overvaluation as well as market expectations of more restricted access to the EU market in the future.
- As of October 2020, the REER is broadly unchanged relative to the 2019 average.

Assessment
- EBA REER level and index approaches suggest a gap of –5.6 and –12.6 percent, respectively, for 2019.
- Given uncertainties related to the United Kingdom’s new trading relationship with the European Union, these model estimates may not be entirely appropriate.
- The IMF staff CA gap assessment implies an REER gap of 12 percent.
- Overall, the staff assesses the REER to be overvalued between 0 and 15 percent, with a midpoint of 7.5 percent.

### Capital and Financial Accounts: Flows and policy measures
Background
- Given the United Kingdom’s role as an international financial center, portfolio investment and other investment are the key components of the financial account.
- In net terms, the CA was financed in 2019 by broadly stable net FDI inflows of 1 percent of GDP, net other investments worth 5.7 percent of GDP (reflecting rising inflows and declining outflows), while net portfolio investments declined by 2 percent of GDP (reflecting accumulation of assets abroad by 4.9 percent of GDP and higher investments in the United Kingdom of 2.8 percent of GDP).
- Nonresidents’ net purchases of UK debt (portfolio and direct investment) represented 2 percent of GDP.
- Despite some turbulence in March, access to finance has remained favorable during the Covid-19 crisis, aided by the Bank of England’s liquidity support and expanded quantitative easing.

Assessment
- Large fluctuations in capital flows are inherent to financial transactions in countries with a large financial sector. This volatility is a potential source of vulnerability, although it is mitigated by sound financial regulation and supervision and a strong financial sector.
- An additional risk is that FDI and portfolio investment inflows may decelerate, driven by concerns about the United Kingdom’s future trade relations with the European Union.

### FX Intervention and Reserves Level
Background
- The pound has the status of a global reserve currency.
- Despite uncertainty about the future relationship between the United Kingdom and the European Union, the share of global reserves in sterling has not changed since 2015, at about 4.5 percent.

Assessment
- Reserves held by the United Kingdom are typically low relative to standard metrics, and the currency is free floating.

### Annex VI. External Debt Sustainability Analysis — Summary
- The external debt sustainability analysis complements the External Sector Assessment (Annex V).
- Under the baseline scenario, external debt is projected to increase from about 300 percent of GDP in 2019 to about 320 percent in the following two years—on account of the contraction in nominal GDP during the Covid crisis—and to recover thereafter.
- In standard shock scenarios, external debt would increase very modestly.
- With more than ¼ of external debt denominated in foreign currency, a real depreciation would be the most significant shock. Still, a net position long in foreign currency suggests that external debt is sustainable.
- Structural reforms to increase productivity and preservation of the strong policy frameworks would help contain any external vulnerabilities as the country transitions to a new trade regime with the EU.

Background (additional)
- External debt peaked at 400 percent of GDP on the eve of the global financial crisis, which was followed by rapid deleveraging, leaving debt at about 300 percent since 2013.
- Almost half of external debt is composed of short-term bank liabilities, while public debt accounts for a tenth.
- The net international investment position has always stayed above -30 percent of GDP over the past decades, as positive valuation gains have tended to offset financial account deficits.

*Source: 1gbrea2020001 - 7.      Fiscal adjustment requirements are achievable. The large reduction of the fiscal deficit*

### Annex V).

### Annex V)

### Assessment of External Debt Sustainability
- Baseline assessment: external debt is projected to grow in 2020 and 2021 due to denominator effects as the pandemic and Brexit depress nominal GDP.
- Debt would reach 321 percent of GDP in 2020, but would revert to its 2019 level by 2025 as the economic recovery and non-interest current account flows induce positive dynamics.
- Standardized shocks are calibrated to ½ standard deviation for interest rates, growth, and the current account.
- Under the standardized shock scenarios, external debt would inch up marginally by the end of the forecast horizon.
- A depreciation shock has a larger impact, leaving external debt somewhat higher at 332 percent of GDP.
- Gross debt assets at about 270 percent of GDP and a net debt position long in foreign currency would offer some insurance against such shock.
- The historical scenario is less favorable, with debt climbing to 340 percent of GDP, as it is based on an average of the past 10 years, which include weaker nominal growth than during the post-Covid recovery as well as a sizeable depreciation of the pound.
- Although external debt is sustainable in the baseline, short-term liability positions at twice the value of GDP make the UK sensitive to market sentiment.
- Policy implication: upholding strong policy frameworks and implementing appropriate structural reforms would be key to preserving sustainability going forward.

### Scenario and Shock Outcomes (selected values from bound tests and boxes)
- Baseline: 301
- Interest-rate shock: 308
- Historical: 341
- Current-account (CA) shock: 308
- Combined shock: 310
- Real depreciation shock (one-time real depreciation of 30 percent in 2021): 332
- Growth shock outcome (in depicted box): 305

### Key Numbers from Table 1 and Related Automatic Debt Dynamics
- Baseline: External debt series snippet (as presented): 288.9 308.7 312.6 312.9 301.8 320.6 318.3 310.7 307.5 303.8 300.8 -1.4
- Change in external debt (series as presented): -19.0 19.7 4.0 0.3 -11.1 18.9 -2.4 -7.6 -3.2 -3.7 -3.0
- Identified external debt-creating flows (4+8+9) (series as presented): 0.3 10.4 -5.3 -9.7 -2.1 38.1 -12.7 -10.5 -2.1 -1.9 -1.3
- Current account deficit, excluding interest payments (series as presented): 0.3 -1.2 -5.1 -7.6 -6.1 -7.3 -5.9 -6.0 -6.2 -6.3 -6.3
- Deficit in balance of goods and services (series as presented): -27.2 -28.2 -30.1 -30.9 -31.2 -28.2 -28.4 -29.0 -28.9 -28.7 -28.6
- Exports (series as presented): 27.3 28.2 30.1 30.9 31.2 28.2 28.4 29.0 28.9 28.8 28.6
- Net non-debt creating capital inflows (negative) (series as presented): -2.7 5.7 -3.5 -0.2 0.5 -0.1 0.4 -0.5 0.0 0.1 0.0
- Automatic debt dynamics 1/ (series as presented): 2.7 6.0 3.3 -2.0 3.6 45.4 -7.2 -4.0 4.1 4.4 5.1
- Contribution from nominal interest rate (series as presented): 4.7 6.7 8.9 11.2 10.4 9.9 10.1 10.1 10.0 10.0 9.9
- Contribution from real GDP growth (series as presented): -7.6 -5.4 -5.4 -3.6 -4.0 35.5 -17.4 -14.1 -6.0 -5.6 -4.8
- Contribution from price and exchange rate changes 2/ (series as presented): 5.6 4.7 -0.1 -9.6 -2.9 ..........
- Residual, incl. change in gross foreign assets (2-3) 3/ (series as presented): -19.2 9.3 9.3 10.0 -9.0 -19.3 10.3 2.9 -1.1 -1.8 -1.7
- External debt-to-exports ratio (in percent) (series as presented): 1059.8 1093.1 1038.3 1012.9 967.3 1136.2 1119.2 1070.0 1062.3 1056.0 1051.5
- Gross external financing need (in billions of US dollars) 4/ (series as presented): 67 17.9 588 0.9 5844.6 5912.2 6326.7 6011.1 6128.2 6421.9 6539.1 6712.7 6897.8
- Gross external financing need (in percent of GDP) (series as presented): 0.2 0.2 0.2 0.2 0.2 10-Year 10-Year 0.2 0.2 0.2 0.2 0.2

### Scenario with key variables at their historical averages
- Scenario with key variables at their historical averages (series as presented): 320.6 330.1 330.7 333.7 337.0 340.7 1.0

### Key Macroeconomic Assumptions Underlying Baseline (selected series as presented)
- Real GDP growth (in percent) (Historical / Average / Deviation / Projections snippet): 2.4 1.7 1.7 1.3 1.3 1.8 0.5 -11.2 5.7 4.6 2.0 1.9 1.7
- GDP deflator in US dollars (change in percent) (series as presented): -6.6 -9.4 -3.1 6.0 -2.4 -0.1 5.5 6.8 0.1 -0.3 1.8 2.1 2.1
- Nominal external interest rate (in percent) (series as presented): 1.5 2.1 2.8 3.9 3.3 2.1 0.9 3.1 3.3 3.3 3.4 3.4 3.4
- Growth of exports (US dollar terms, in percent) (series as presented): -7.5 -4.6 5.1 10.2 -0.2 3.5 7.3 -14.2 6.7 6.5 3.5 3.4 3.2
- Growth of imports (US dollar terms, in percent) (series as presented): -7.6 -3.6 3.5 9.2 0.4 3.3 6.3 -20.0 16.1 7.2 3.1 3.1 3.0
- Current account balance, excluding interest payments (series as presented): -0.3 1.2 5.1 7.6 6.1 2.7 2.9 7.3 5.9 6.0 6.2 6.3 6.3
- Net non-debt creating capital inflows (series as presented): 2.7 -5.7 3.5 0.2 -0.5 0.2 2.5 0.1 -0.4 0.5 0.0 -0.1 0.0

### Fund Relations, Data Adequacy, and Statistical Notes (selected points)
- Membership Status: Joined December 27, 1945; accepted Article VIII.
- Quota: 20,155.1 SDR Million (100.00 percent).
- Fund holdings of currency: 15,709,74 SDR Million (77.94 percent).
- Reserve position in Fund: 4,446.78 SDR Million (22.06 percent).
- Net cumulative allocations (SDR Department): 10,134.20 SDR Million (100.00 percent); Holdings: 9,986,81 SDR Million (98.55 percent).
- Overdue Obligations and Projected Payments to Fund (Charges/Interest): 0.01 0.28 0.28 0.28 0.28 (for 2020–2024 as presented).
- Exchange Rate Arrangement: The UK authorities maintain a free floating regime.
- Article IV Consultation: Last concluded November 12, 2018. The UK is on the standard 12-month consultation cycle.
- FSAP: Mandatory FSAP conducted in time for the 2016 Article IV consultation.
- Assessment of data adequacy for surveillance: General: Data provision is   broadly adequate for surveillance.
- National Accounts: ONS compiles national accounts in line with ESA 2010; monthly GDP released around the 10th of each month; second quarterly estimate released 12 weeks after the reference quarter. ONS developed the Fortnightly Business Impact of Coronavirus Survey (BICS).
- Price Statistics: CPI reference year 2015; CPIH reference year 2015; PPI reference period 2015.
- Government Finance Statistics: GFS data compiled on an accrual basis; GFS data submitted in line with GFSM 2014; Whole of Government Accounts published annually with full balance sheet.
- Monetary and Financial Statistics: BoE has not yet reported monetary statistics using the SRFs for IFS publication; BoE reports some series using old forms (forms 10R and 20R).
- Financial Sector Surveillance: BoE reports all 12 core FSIs and many encouraged FSIs; data frequency improved from semi-annual to quarterly since 2015, but timeliness needs improvement.
- External Sector Statistics: ONS compiles quarterly BoP and IIP; BPM6 implemented September 2014; BoP statistical bulletin and time series dataset published quarterly 90 days after reference period.
- Data Standards: The UK subscribes to SDDS and is working towards SDDS Plus.

### Supplementary Information (December 2020 developments)
- UK-EU negotiations toward a post-Brexit trade deal had yet to reach a conclusion as of December 2020; talks to continue after an impasse; European Commission published contingency measures for a no-deal scenario including transitional provisions for air and road connectivity for 6 months and proposed continuation of fishing access and quotas for 12 months (reciprocal).
- Understanding reached on implementing the Northern Ireland Protocol covering application of State aid rules and exemptions for certain goods and activities; UK indicated it will drop clauses in a draft UK Internal Market Bill that were set to be subject to legal proceedings by the EU.
- The Prudential Regulation Authority (PRA) decided not to extend the exceptional and precautionary action taken in March on banks’ dividend distribution and cash bonus payments, allowing banks to recommence some capital distributions.
  - Distributions to ordinary shareholders by large UK banks should not exceed the higher of 20 basis points of risk-weighted assets as at end-2020; or of 25 percent of cumulative eight-quarter profits covering 2019 and 2020 after deducting prior shareholder distributions over that period.
  - PRA intends to transition back to its standard approach to capital-setting and shareholder distributions through 2021.

*Source: Annex V) (1gbrea2020001 - Annex V).*

### 4.      The UK started delivering a Covid-19 vaccine on December 8. The government has

### 4.      The UK started delivering a Covid-19 vaccine on December 8. The government has

### Vaccine rollout and procurement
- The UK started delivering a Covid-19 vaccine on December 8.
- The government has purchased 40 million doses of the vaccine developed by BioNTech and Pfizer, which would allow immunization of 20 million people.
- Priority groups: the elderly, frontline health and social care workers, and individuals at risk; most vulnerable people should be vaccinated through April.
- The vaccine is being delivered for free, and liability lies with the government under the current emergency process.
- Distribution is subject to large logistical challenges.
- The UK has reserved another 317 million doses of vaccine from six other providers (including 100 million from AstraZeneca/Oxford University).
- These additional options have not yet secured approval and/or completed clinical trials.
- The UK government has requested that the Medicine and Healthcare Products Regulatory Agency review the AstraZeneca/Oxford vaccine for emergency use.

### High-frequency indicators and 2020Q4 activity
- October GDP grew by 0.4 percent.
- Declining mobility indicators suggested weaker activity, but adaptation in non-contact-intensive sectors likely supported the 0.4 percent growth.
- November: England-wide lockdown impacted overall activity; manufacturing PMI points to a sizeable build-up of input inventories amid Brexit-related uncertainty (a factor likely to reverse in early 2021).
- Daily mobility and activity data show a relatively quick rebound after the end of the lockdown on December 2.
- High-frequency data releases hint to stronger-than-expected GDP in 2020Q4.

### Bank of England, bank dividends, and prudential supervision
- Considering the BoE decision to allow limited bank dividend payments, a cautious case-by-case approach to lifting them is warranted.
- Rationale: ensure banks have enough capital to absorb losses while supporting lending.
- If the outlook deteriorates and depending on results of a full system-wide stress test planned for mid-2021, the dividend-lifting process may need to be slowed or paused.
- Banks’ medium-term capital plans including dividend distributions must remain subject to enhanced supervision.

### Economic impact of COVID-19 and policy response
- The pandemic caused exceptional hardship; UK GDP looks set for its biggest annual fall since the Great Frost of 1709.
- Output fell an estimated 25 percent between February and April due to restrictions.
- The economy grew rapidly over the summer but saw a resurgence of the virus in recent months prompting greater restrictions.
- Under the OBR’s central scenario (published in late November), with restrictive public health measures kept in place until the spring, the economy is not expected to return to its pre-virus level of activity until late 2022.
- Since March, government action included:
  - helping to pay the wages of people in 9.6 million jobs which might otherwise have been lost;
  - supporting the livelihoods of an additional 2.6 million self-employed workers;
  - making additional welfare support available.
- UK businesses received support via loans, tax deferrals, business rate reliefs, and grants, with focus on small businesses in hardest-hit sectors.
- The Bank of England loosened monetary policy, cutting interest rates and resuming its asset purchase program; it views the current stance as accommodative.
- Action since the financial crisis strengthened financial system resilience; UK banks entered the pandemic well-capitalized (desktop stress test in BoE’s Interim Financial Stability Report in May).
- Release of the counter cyclical capital buffer supported bank lending.

### Fiscal policy, spending review, and labor market measures
- In late November, the government delivered a one-year spending review prioritizing funding to support the response to COVID-19, support jobs and invest in recovery.
- Most aspects set out single-year plans for 2021-22; multi-year settlements provided for health and schools.
- Key infrastructure plans provided £100bn of capital investment next year, a £27bn real-terms increase on FY19-20.
- Government objective: over £600bn of gross public investment over the next five years, reaching highest sustained levels of public sector net investment as a proportion of GDP since the late 1970s.
- Priority welfare outcomes included maximizing employment, improving opportunities through work, addressing poverty via workforce progression and financial resilience, and delivering a reliable, high quality welfare and pensions system.
- A new three-year Restart program will provide intensive and tailored support to help over one million unemployed people find work.
- Additional funding for work search support measures, and the Kickstart Scheme to create hundreds of thousands of new, fully-subsidized jobs for young people at risk of long-term unemployment.
- Staff note UK spends more on family benefits as a share of GDP than all but one OECD member and is in the top quintile for social spending.
- Staff estimate for economic scarring is somewhat larger than those of the OBR or the Bank of England; all assessments characterized by high uncertainty.
- Authorities welcome finding that the UK retains policy space to respond.
- Government: announced increases in borrowing and debt over the near term to fund important spending are necessary and affordable; intends to take steps over time to ensure public finances are on a sustainable path.

### Monetary policy outlook
- The MPC has noted that if the outlook for inflation weakens, it stands ready to take whatever additional action is necessary to achieve its remit.
- The MPC does not intend to tighten monetary policy at least until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2% inflation target sustainably.

### Brexit, trade, and financial stability preparations
- The UK left the European Union on 31 January 2020; it will be leaving the Single Market and the Customs Union at the end of the transition period regardless of negotiations.
- Financial sector preparations have progressed well.
- The FPC judges most risks to UK financial stability from disruption to cross-border financial services at end of transition have been mitigated, reflecting extensive preparations by authorities and private sector.
- Some market volatility and disruption to financial services, particularly to EU-based clients, could arise.
- Any new equivalence decisions should aim to be as stable as possible; UK advocates a proportionate approach to withdrawal of equivalence, including appropriate adaptation periods depending on circumstances.

### Infrastructure, climate policy, and net zero commitments
- Government is investing in economic recovery, providing £100bn of capital spending next year to rebuild for a stronger, greener, more equal future.
- New National Infrastructure Strategy objectives: economic recovery; levelling up and unleashing potential of all parts of the UK; meeting net zero emissions target by 2050.
- The government published a refreshed Green Book to ensure project appraisals analyze alignment with priorities including levelling up and regional impacts.
- The UK has a well-established system of carbon budgets and legislated to end its contribution to global warming by 2050.
- The Treasury is undertaking a “Net Zero Review” to assess maximizing economic growth opportunities from the transition to a green economy, cutting emissions without exporting them elsewhere, and ensuring a fair balance of contributions including reducing costs for low income households.
- The Prime Minister announced a new target to reduce greenhouse gas emissions by at least 68% by 2030, relative to 1990 levels.
- The ten point plan aims to create and support up to 250,000 British jobs through a green industrial revolution.
- TCFD-aligned disclosures will be mandatory across the economy by 2025.
- The Bank of England published its own disclosure for the first time earlier this year.
- The UK will implement a Green Taxonomy and will issue its first Sovereign Green Bond in 2021, subject to market conditions, with further issuances to build a ‘green curve’.
- A government-commissioned independent global review on the economics of biodiversity, led by Professor Sir Partha Dasgupta, aims to build a unified economic framework that accounts for natural assets.

### International engagement and contributions
- The UK intends to step up international engagement, including as an independent member of the World Trade Organization, to strengthen the rules-based global trading system.
- In under two years, the UK government has signed or agreed in principle free trade agreements with 56 countries (as of 10 December), including Canada, Japan, Singapore and Switzerland.
- The UK is the largest donor to the COVAX Advance Market Commitment to support developing country access to COVID-19 vaccines.
- The UK strengthened core funding to the WHO over the next four years with a 30 percent increase to existing funding.
- The UK remains the largest donor to Gavi, the Vaccine Alliance.
- The UK continues to work through the Fund, the World Bank Group and other institutions to promote shared prosperity, including through replenishments to the Fund’s CCRT and PRGT loan resources.

*Statement by Shona Riach, Executive Director for the United Kingdom; David Paul Ronicle, Alternate Executive Director; and Tommy Chrimes, Advisor to the Executive Director — December 16, 2020*

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_Source: https://www.imf.org/-/media/files/publications/cr/2020/english/1gbrea2020001.pdf_