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---

### Recent economic developments and outlook
- Political context:
  - President Arevalo’s landslide general election (June/August 2023) win opened a unique window for reforms; Partido Semilla suspension is posing governability challenges.
  - Pragmatic alliances in Congress are needed to implement the administration’s economic program (social, infrastructure, and governance).
  - International community support remains solid; the window for reforms is narrowing.
- Growth and resilience:
  - Growth averaged 3.5 percent over the past ten years.
  - Guatemala described as resilient against shocks but trapped in a low growth undesirable equilibrium with large remittance inflows, widening structural gaps, low domestic tax revenue, and constraints from insufficient legal certainty and security.
  - 2023 economic growth: estimated 3.5 percent (4.2 percent in 2022).
  - Economic activity to April 2024: 3.5 percent y-o-y; construction and mining showed negative y-o-y growth.
  - Confidence index: 72 percent positive in May 2024.
- Labor and social indicators:
  - Official unemployment rates remain low.
  - About 46 percent of children suffer chronic malnutrition; about 30 percent of the population is exposed to food insecurity.

### Inflation, monetary policy, and FX operations
- Inflation:
  - CPI inflation: from a 9.9 percent peak y-o-y in February 2023 to 3.62 percent in June 2024.
  - Core inflation: dropped from 5.3 percent to 3.67 percent in May 2024.
  - Monetary policy target: 4 percent +/- 1 percentage point.
  - Inflation drivers: moderated imported inflation and second-round effects since mid-2023; strong domestic demand; rebound in container costs since late 2023; food and oil prices showing some inertia.
- Monetary policy stance and operations:
  - Policy rate unchanged since April 2023 and below the U.S. federal funds rate target range.
  - Market lending rates showed little reaction to 2022-23 policy rate changes; credit continues to grow at two-digit rates.
  - Since 2022, Banguat’s monetary stabilization operations have cost over 0.7 percent of GDP.
  - Banguat’s FX participation: net FX sale in 2023; net FX purchases resumed in 2024 totaling about 0.6 percent of GDP between January and May 2024.
  - Since January 2024 the FX participation rule band was widened to 0.95 percent (a step towards a more flexible exchange rate).
  - Staff recommendation: policy rate path should remain data-driven and coordinated with fiscal policy; align policy rate with Banguat's main operations and the price of liquidity; remove the 50bps corridor around the policy rate target applied to liquidity market operations.

### Fiscal developments, supplementary budget, and outlook
- 2023 fiscal outcomes:
  - Central government's primary fiscal balance closed in surplus.
  - Overall deficit in 2023 was 1.3 percent of GDP (below the 3 percent deficit approved under the amended 2023 budget).
  - Tax revenue 2023: 11.7 percent of GDP; estimated tax collection gains at 0.6 percent of GDP.
  - Public spending 2023: execution at 97 percent (96 percent in 2022).
  - Social spending at 5.5 percent of GDP; infrastructure spending in 2023 was 0.7 percent of GDP.
  - Central government debt to GDP: decreased to 27.2 percent in 2023 (29 percent of GDP in 2022).
  - IGSS-related and Banguat receivables: IGSS debt includes 0.2 percent of GDP MoF unpaid social contributions recognized in courts and an estimated 8.3 percent of GDP remaining in dispute; Banguat’s government receivables associated with Banguat’s monetary policy operations were about 4 percent of GDP by end-2023.
- Early-2024 developments:
  - Up to May-2024, 2024 tax collection was estimated at 4.9 percent of GDP, a 9 percent point higher than a year earlier (end-May 2023).
  - By end-May 2024, spending execution was 36 percent of the 2024 initial operating budget; capital spending execution at 28 percent.
  - The administration suspended most investments overseen by key Ministries pending audits of inherited contracts.
- Supplementary budget:
  - In late May 2024, the administration sent a supplementary budget proposal of 1.7 percent of GDP to Congress.
  - By Ministry, the supplementary budget allocates 0.4 percent of GDP to transfers to municipalities and autonomous entities, and 0.4 percent of GDP to education, health, and social assistance.
  - If approved (baseline scenario), end-2024 would show a primary surplus of 0.2 percent of GDP and a 1.4 percent of GDP overall deficit (compared with 2.7 percent of GDP budgeted).
  - Approval required before August 2024 but faces opposition.
- Fiscal projections (selected):
  - Staff projects: primary fiscal surplus in 2024 but two percent overall deficits from 2025 onwards under the baseline.
  - Baseline targets increasing fiscal revenue to 13 percent of GDP over time.
  - Table highlights: Total revenues 2023 12.5 (percent of GDP); projected 2029 13.0. Total expenditures 2023 13.7; projected 2029 15.0. Overall balance 2023 -1.3; projected 2029 -2.0. Central Government debt 2023 27.2; projected 2029 27.4.

### External sector, remittances, and reserves
- Current account and remittances:
  - 2023 CA surplus widened to 3.1 percent of GDP (from 1.3 percent in 2022).
  - Remittances: about 19 percent of GDP in 2023; strong inflows with 9.3 percent growth y-o-y at end-May 2024.
  - Goods exports dropped by 4.3 percent (y-o-y) in the first four months of 2024; volumes declined by about 12 percent.
- Reserves and exchange rate:
  - Net international reserves in 2023: 164 percent of the ARA metric (end-of-the-year).
  - Two Eurobonds totaling U.S.$1.5bn were issued in the second half of 2023.
  - By end-June 2024, international reserves remained above U.S.$21bn.
  - Nominal exchange rate: slightly appreciated in 2023 and early 2024; real effective exchange rate appreciated marginally about 0.4 percent y-o-y in 2023.
- External assessment and policy implications:
  - External position in 2023 stronger than the level consistent with medium-term fundamentals and desirable policies; EBA implies REER undervaluation of 14.2 percent in 2023.
  - Staff policy advice: increase infrastructure spending and improve education and health within a sustainable fiscal framework to shift from a remittances-led to a domestic-driven growth model.

### Financial sector developments and stability
- Banking sector metrics:
  - Aggregate liquidity ratios above minimum requirements; profitability ratios continue to be strong.
  - Credit growth: private sector credit growing at double digits—16 percent in May 2024; credit-to-GDP gap (in domestic currency) has widened somewhat. In 2023, credit to GDP remained at 40 percent.
  - Consumer credit growth: 23 percent; credit cards almost doubled by end-April 2024 (y-o-y) from a low base.
  - Quetzalization: since 2023 most credit held in FX shifted to local currency.
- Asset quality and provisioning:
  - System solvency ratio dropped from 17.3 percent (end-2021) to 15.5 percent in April 2024.
  - Nonperforming loans (end-2023): NPLs on consumption at 2.6 percent and 3.4 percent for small businesses; April 2024: 3.3 percent and 3.6 percent, respectively.
  - Provisioning: dropped to 151 (April 2024) from 189 (end-2023) and 263 (end-2022).
  - Liquidity ratios show declines.
- Regulation and supervision:
  - Since January 2024, strengthened credit risk management regulation (Basel III provisioning using expected losses, dynamic provisioning, credit asset alignment, differential treatment for restructured and refinanced instruments) applicable to banks with a two-year gradual implementation.
  - New credit card legislation approved in February 2024 to enter into effect on September 1, 2024; it covers payment capacity, disclosure, supervision, and international security standards and applies to banks and other supervised entities.
  - Staff recommendation: urgent Congress approval of a revised draft of the 2002 Banking Law and Financial Groups to provide legal protections for supervisors, mandate risk evaluation and response, modern resolution and crisis management frameworks, and up-to-date supervisory tools.

### Governance, anti-corruption, and data initiatives
- Anti-corruption actions:
  - National Commission Against Corruption (CNC) launched late February 2024 with civil society and indigenous participation.
  - CNC’s six-pillar strategy: (1) regulation; (2) prevention; (3) detection and reporting; (4) institutional coordination; (5) civic participation; (6) monitoring and evaluation.
  - CNC-led Code of Ethics for the Executive Branch published and under implementation.
  - Administration reviewed over 1,400 inherited investment projects for potential illegalities; some projects reported to the Attorney General’s office.
  - Administration published an Ethics Code for civil servants within the first 100 days; integrity units being established in each executive branch entity.
- AML/CFT and international evaluations:
  - AML/CFT Law remains pending in Congress; next GAFILAT evaluation scheduled for early 2027.
  - IMF legal team, IADB and WB legal experts shared technical advice; working group established to align draft with FATF standard.
  - Near-term benefit: approving and effectively implementing AML/CFT law could prevent corresponding banking relationships and credit from foreign financial institutions from being negatively impacted.
- Data and statistics:
  - Banguat’s newly published Indicadores GT identified as important data sharing effort.
  - Authorities initiated compilation of environmental national accounts in 2024.
  - New CPI published with reference period December 2023; further revisions in January 2025 will include a 2024 average reference period.
  - Banguat and INE MoU signed late 2023 for quarterly labor markets data; first quarterly report covering October-December 2024 expected early 2025.
  - Supported by CAPTAC-DR, authorities enhancing non-financial sector balance sheet statistics; historical flow reports published for years 2013-23.
- CPI methodological changes (selected):
  - New CPI weights (December 2023 reference): Food and nonalcoholic beverages 32.3 (was 28.8); Health 7.1 (was 4.2); Education 7.6 (was 3.7); Restaurants and hotels 2.3 (was 9.2).
  - New CPI covers 437 products for over 930 goods and services; grouped into 13 divisions.

### Macroeconomic projections, scenarios, and risks
- Growth projections (staff baseline):
  - 3.5 percent in 2024;
  - 3.6 percent in 2025;
  - gradually increase to 3.8 percent in the medium term under the baseline.
- Alternative scenarios:
  - Reform agenda scenario: growth reaching five percent in the medium term (if reforms are approved by Congress).
  - Non-reform weak governability scenario: growth decelerating below potential over time.
- External and fiscal projections (baseline):
  - Current account surplus expected to decline gradually over time driven by large—although decelerating—remittance inflows and strong imports.
  - International reserves expected to remain solid in the near term.
- Risks (characterization):
  - Risks remain high and tilted to the downside.
  - External risks: tighter U.S. monetary policy and potential softening of the U.S. Hispanic labor market affecting remittances and exports; commodity price volatility; regional conflicts; extreme climate events.
  - Domestic risks: re-emergence of social discontent due to lack of reforms; instability driven by the fight against corruption and cyberattacks.
  - Upside: successful implementation of the pro-growth, anti-corruption reform agenda would boost growth above baseline.

### Staff findings and policy recommendations (selected)
- Fiscal policy:
  - Staff supports a temporary expansionary fiscal stance, anchored to the two-percent medium-term deficit implicit fiscal rule, to address infrastructure, education, and social needs.
  - Temporary up to three percent of GDP fiscal deficits would still ensure medium-term debt sustainability if cast in a medium-term growth strategy with consistent MT fiscal revenue and spending targets and a MT debt strategy.
  - Staff stressed importance of returning to the two percent of GDP medium-term fiscal anchor for the overall fiscal balance.
  - Key tax and revenue measures recommended:
    - (i) Improve accuracy of budgeted tax revenue projections and tax collection: align SAT internal regulation with quantitative-adjusted criteria of the 2013 SAT Organic Law (Article 27); de-couple annual performance renewal review from tax revenue performance.
    - (ii) Continue efforts to improve tax collection and reduce tax evasion through audits, digitalization, targeting low-tax-collection economic areas and customs smuggling; adopt legislation providing legal protection for SAT auditors and public officials; use tools to identify fraud (accessing unusual financial transactions under legal safeguards; measuring VAT underreporting gaps); design taxpayer awareness campaign linking efficient spending and increased tax revenue.
    - (iii) Adopt a broad-based updated tax reform in the medium term: broaden the tax base, increase personal income and VAT tax rates, reduce deductions and exemptions, clarify eligibility criteria for general or simplified regimes, and capture residents’ passive foreign income.
  - Staff opposes legislative discussions to reduce tax collection (e.g., elimination of the ISO (Solidarity) tax, draft Bill 6348). Bill 6348 (as discussed) would give about 3,000 large companies a tax cut of up to 1 percent of their gross revenues, increasing public debt from 27.7 percent (2024 projection) to about 33 percent of GDP over the next five years.
- Public investment and spending:
  - Prioritize pro-growth capital investments; scale up investments in infrastructure and targeted social programs with realistic action plans, milestones, and quality controls.
  - Publish multi-annual plans with near- and medium-term targets; enact legislation to facilitate physical infrastructure investment; amend PPP law and Free Zone law; reform public procurement and civil service legislation.
  - Eliminate distorting budget process practices: pre-vetting of all investment projects before Congress approval recommended.
- Debt management and financing:
  - Given low debt ratios and moderate risks of debt distress, temporarily higher deficits can be partly funded by higher borrowing.
  - Borrowing plans should be designed in the context of the MT debt management strategy to expand markets and complete the sovereign yield curve with a pre-announced annual debt issuance plan.
  - Suggest issuance of green bonds to finance climate mitigation, adaptation, and resilience investments (authorities planned issuance of the first green bond U.S.$500 million later in 2024).
- Monetary and FX framework:
  - Strengthen Banguat’s governance and policy framework: amend the 2002 Central Bank Organic Law to explicitly recognize inflation as Banguat’s primary objective and align governance with its 2005-IT mandate; prepare a plan for recapitalization of Banguat’s stock of net deficiencies; prepare Banguat’s financial statements according to IFRS aligning with private banks’ adoption of IFRS9 by 2026-27.
  - Improve monetary policy transmission and the interbank market: modernize the reserves requirement framework; align the policy rate with Banguat's main operations and the price of liquidity; remove the 50bps corridor around the policy rate target applied to liquidity market operations.
  - Prepare for larger investment flows and reduce monetary policy costs: gradually transfer market risks to the private sector by widening FX intervention bands and letting the exchange rate become the shock absorber; develop FX and hedging markets and a forward-looking communication strategy.
- Financial sector supervision and market development:
  - Urgent approval and implementation of Superintendency of Banks’ credit regulations and approval of a new banking law updating the 2002 Law on Banks and Financial Groups.
  - Spearhead adoption of international accounting standards in banks’ disclosure scheduled for 2026-27; publish the Financial Stability Report.
  - Improve crisis management and safety-net frameworks; adopt an institutional arrangement empowered to make macroprudential policy decisions.
  - Promote financial inclusion (2024-27 strategy): expand digitalization, improve financial literacy and user protections, expand banking services to SMEs, youth, women, and rural areas.
- Governance and anti-corruption:
  - CNC should develop and transparently publish the administration’s medium-term anti-corruption strategy with a roadmap and timeline; strengthen procurement framework; publish beneficial ownership information of winners of public contracts; improve asset declarations framework for senior officials and PEPs.
  - Continue strengthening anti-corruption legislation, judicial integrity, and independence and effectiveness of anti-corruption institutions; leverage IMF technical assistance for drafting legislation and diagnostics.
- Capacity development priorities:
  - Core CD workstreams: revenue administration, public financial management (including PIMA/C-PIMA), central bank operations and inflation targeting, financial supervision and regulation, financial integrity (AML/CFT), and statistics (real and government).

*Source: IMF staff report — "1. Recent Economic Developments" and related sections (Content unit: 1gtmea2024001-print-pdf).*

### 1. Recent Economic Developments ______________________________________________________________ 26

### 1. Recent Economic Developments

### Context and outlook
- President Arevalo’s landslide general election (June/August 2023) win opened a unique window for reforms; Partido Semilla suspension is posing governability challenges. Pragmatic alliances in Congress are needed to implement the administration’s economic program (social, infrastructure, and governance). International community support remains solid; the window for reforms is narrowing.
- Guatemala is described as resilient against shocks but trapped in a low growth undesirable equilibrium, with large remittance inflows, widening structural gaps, low domestic tax revenue, and constraints from insufficient legal certainty and security. Recent heavy rains exposed infrastructure weaknesses, with some roads collapsing and causing disruption.
- Growth averaged 3.5 percent over the past ten years; sovereign debt around 27 percent of GDP; international reserves well above standard metrics.

### Real sector and labor market
- 2023 economic growth: estimated 3.5 percent (4.2 percent in 2022).
- Economic activity decelerated starting 2023: Q3, with temporary disruptions following the election.
- To April 2024, economic activity was 3.5 percent y-o-y; construction and mining showed negative y-o-y growth.
- Confidence index: 72 percent positive in May 2024.
- Official unemployment rates remain low; social indicators show persistent weaknesses (About 46 percent of children suffer chronic malnutrition; about 30 percent of the population is exposed to food insecurity).

### Inflation and prices
- CPI inflation: from a 9.9 percent peak y-o-y in February 2023 to 3.62 percent in June 2024.
- Core inflation: dropped from 5.3 percent to 3.67 percent in May 2024.
- Monetary policy target: 4 percent +/- 1 percentage point.
- Inflation drivers noted: moderated imported inflation and second-round effects since mid-2023; strong domestic demand, rebound in container costs since late 2023, and food and oil prices showing some inertia.
- External shocks affecting trade: Canal de Suez attacks (since late 2023), climate events at Canal de Panama, and capacity-related delays in Puerto Quetzal.

### Monetary policy and foreign exchange operations
- Policy rate has remained unchanged since April 2023 and below the U.S. federal funds rate target range.
- Market lending rates have shown little reaction to 2022-23 policy rate changes; credit continues to grow at two-digit rates.
- Market rate differential with the U.S. and political uncertainty triggered capital outflows in 2023 to repay expensive US dollar credit lines and some search for yield.
- Banguat actively manages liquidity in quetzal and dollar with liquidity injections in targeted episodes.
- Since 2022, Banguat’s monetary stabilization operations have cost over 0.7 percent of GDP.
- Banguat’s FX market participation: net FX sale in 2023; net FX purchases resumed in 2024, totaling about 0.6 percent of GDP between January and May 2024.
- Since January 2024 the FX participation rule band was widened to 0.95 percent (a step towards a more flexible exchange rate).

### Fiscal developments
- 2023 central government's primary fiscal balance closed in surplus; overall deficit in 2023 was 1.3 percent of GDP (below the 3 percent deficit approved under the amended 2023 budget).
- In the first five months of 2024, tax revenue collection is well-above the 2023 budget; execution remains low.
- The administration suspended most investments overseen by key Ministries pending audits of inherited contracts.
- Tax revenue 2023: 11.7 percent of GDP from ongoing efforts to strengthen tax administration; estimated tax collection gains at 0.6 percent of GDP.
- Up to May-2024, 2024 tax collection was estimated at 4.9 percent of GDP, a 9 percent point higher than a year earlier (end-May 2023).
- Public spending 2023: execution at 97 percent (96 percent in 2022). Social spending at 5.5 percent of GDP; education wage bill explained much of that. Capital budget increased in 2023; infrastructure spending in 2023 was 0.7 percent of GDP.
- By end-May 2024, spending execution was 36 percent of the 2024 initial operating budget; capital spending execution at 28 percent.
- Central government debt to GDP: decreased to 27.2 percent in 2023 (29 percent of GDP in 2022). Ongoing audits may uncover inherited contractual obligations that could add to central government liabilities (examples cited include IGSS and Banguat).
- IGSS-related and Banguat receivables: IGSS debt includes 0.2 percent of GDP MoF unpaid social contributions recognized in courts and an estimated 8.3 percent of GDP remaining in dispute; Banguat’s government receivables associated with Banguat’s monetary policy operations were about 4 percent of GDP by end-2023.

### Supplementary budget and 2024 fiscal outlook
- In late May 2024, the administration sent a supplementary budget proposal of 1.7 percent of GDP to Congress.
- The supplementary budget would be funded by cash balances accumulated throughout the year and end-2023 carry-over cash balances; approval required before August 2024 but faces opposition.
- By Ministry, the supplementary budget allocates 0.4 percent of GDP to transfers to municipalities and autonomous entities, and 0.4 percent of GDP to education, health, and social assistance.
- If approved (baseline scenario), end-2024 would show a primary surplus of 0.2 percent of GDP and a 1.4 percent of GDP overall deficit (compared with 2.7 percent of GDP budgeted).
- The administration will submit the 2025 draft budget proposal by early September 2nd for Congress approval before end-November 2024.

### External sector and reserves
- 2023 current account (CA) surplus: widened to 3.1 percent of GDP, driven by large remittances and an improved trade balance despite lower exports (also in volume).
- A 4.1 percent of GDP increase in other investment net outflows helped absorb much of the CA surplus.
- Remittance inflows: strong, with 9.3 percent growth y-o-y at end-May 2024.
- Goods exports dropped by 4.3 percent (y-o-y) in the first four months of 2024; volumes declined by about 12 percent.
- Net international reserves in 2023: 164 percent of the ARA metric (end-of-the-year); two Eurobonds totaling U.S.$1.5bn were issued in the second half of 2023.
- By end-June 2024, international reserves remained above U.S.$21bn.
- Nominal exchange rate: slightly appreciated in 2023 and early 2024; real effective exchange rate appreciated marginally about 0.4 percent y-o-y in 2023.
- The external position in 2023 is stronger than the level consistent with medium-term fundamentals and desirable policies; the undervaluation of the real effective exchange rate was larger than in 2022.

### Financial sector and stability
- Risks to financial stability remain low, with pockets of vulnerability emerging.
- Banking system metrics: aggregate liquidity ratios above minimum requirements; profitability ratios continue to be strong.
- Credit growth: private sector credit growing at double digits—16 percent in May 2024; credit-to-GDP gap (in domestic currency) has widened somewhat. In 2023, credit to GDP remained at 40 percent.
- Currency composition: since 2023, most credit held in FX shifted to local currency, reducing banks’ FX risk exposures.
- Consumer credit and credit cards growth: consumer credit growing at 23 percent; credit cards almost doubled by end-April 2024 (y-o-y) from a low base; these are noted as largely collateralized.
- Credit quality: slight deterioration. System solvency ratio dropped from 17.3 percent (end-2021) to 15.5 percent in April 2024.
- Nonperforming loans (end-2023): NPLs on consumption at 2.6 percent and 3.4 percent for small businesses; April 2024: 3.3 percent and 3.6 percent, respectively.
- Provisioning: dropped to 151 (April 2024) from 189 (end-2023) and 263 (end-2022).
- Liquidity ratios show declines.
- Supervisory and regulatory actions: since January 2024, strengthened credit risk management regulation (Basel III provisioning using expected losses, dynamic provisioning, credit asset alignment, differential treatment for restructured and refinanced instruments) applicable to banks. New credit card legislation approved in February 2024 to enter into effect on September 1, 2024; it covers payment capacity, disclosure, supervision, and international security standards and applies to banks and other supervised entities.

*Source: IMF staff report — "1. Recent Economic Developments" (Content unit: 1gtmea2024001-print-pdf).*

### 10.      The new administration has an anti-corruption and pro-governance agenda.

### 10.      The new administration has an anti-corruption and pro-governance agenda.

### Anti-corruption and governance measures
- The National Commission Against Corruption (CNC), replacing former President Giammattei’s Presidential Commission, was launched in late February 2024 with civil society and indigenous groups as participants.
- The CNC is shepherding efforts against impunity with a multi-institutionally coordinated prevention-based strategy and a six-pillar strategy encompassing:
  - (1) regulation (e.g., whistle blower legislation and the registration of last beneficiaries' ownership);
  - (2) prevention;
  - (3) detection and reporting (publication of a table with allegations of corruption and status);
  - (4) institutional coordination (e.g., publication of protocols);
  - (5) civic participation (campaigns and dialog); and
  - (6) monitoring and evaluation (based on international indexes and indicators).
- The CNC-led Code of Ethics for the Executive Branch was recently published and is now under implementation.

### AML/CFT and international evaluations
- The AML/CFT Law remains pending in Congress, with the next GAFILAT evaluation scheduled for early 2027.
- The IMF legal team, together with IADB and WB legal experts, shared technical advice and are part of a working group to incorporate it into the existing draft Bill in line with FATF standard.
- The administration is committed to submit the draft to Congress in the coming months.
- Near-term benefit cited: approving an AML/CFT law and effectively implementing it could prevent corresponding banking relationships and credit from foreign financial institutions from being negatively impacted.

### Data quality and statistical initiatives
- Efforts to share and strengthen data quality are ongoing, but gaps remain (Annex IX).
- Banguat’s newly published Indicadores GT is identified as an important data sharing effort.
- In 2024 the authorities initiated the compilation of environmental national accounts.
- The authorities published a new consumer price index (CPI) with updated basket weights and the reference period December 2023; further revisions will be introduced in January 2025, including a 2024 average reference period.
- Banguat and the National Institute of Statistics (INE) signed the MoU in late 2023 with the timeline for the publication of quarterly labor markets data; the first quarterly report, covering October-December 2024, is expected to be published in early 2025.
- Supported by CAPTAC-DR, authorities continue enhancing non-financial sector balance sheet statistics; historical flow reports were published for years 2013-23.

### Outlook and macroeconomic projections
- Economic growth projections:
  - 3.5 percent in 2024;
  - 3.6 percent in 2025;
  - gradually increase to 3.8 percent in the medium term under the baseline scenario.
- Alternative scenarios:
  - Reform agenda scenario: growth reaching five percent in the medium term (if reforms are approved by Congress).
  - Non-reform weak governability scenario: growth decelerating below potential over time.
- Fiscal balance and external sector under baseline:
  - Budget: primary fiscal surplus in 2024 but two percent overall deficits from 2025 onwards.
  - Current account: CA surplus expected to decline gradually over time, driven by large—although decelerating—remittance inflows and strong imports.
  - International reserves: expected to remain solid in the near term.
- Under the reform scenario: temporary three percent deficits, anchored at two percent of GDP in the medium term, would still be consistent with preserving debt sustainability.

### Risks to the outlook (characterization)
- Risks remain high and tilted to the downside:
  - External: tighter U.S. monetary policy with potential softening of the U.S. Hispanic labor market could adversely affect remittance inflows and exports.
  - Commodity price volatility, intensification of regional conflicts (supply chain disruptions), extreme climate events → higher food and energy prices, exacerbating food insecurity and inflationary pressures.
  - Domestic: re-emergence of social discontent due to lack of reforms addressing chronic structural weaknesses; instability driven by the fight against corruption and cyberattacks.
- Upside: successful implementation of the authorities’ pro-growth, anti-corruption reform agenda would boost growth and growth potential above baseline.

### Authorities’ views on outlook and policies (summarized)
- Authorities broadly agree with the near and medium-term outlook and the risk characterization (external geopolitical tensions; domestic political situation affecting confidence).
- Authorities view 3.5 percent growth as positive but emphasize the need to grow more to satisfy economic and social needs, particularly for the vulnerable.
- Authorities committed to fight tax evasion, enhance tax administration, and to fiscal prudence while addressing investment gaps with up to three percent temporary deficit deviations and the goal to return to a two percent of GDP deficit in the medium term.
- Administration reviewed over 1,400 inherited investment projects for potential illegalities; renegotiations underway; first PPP expected to start work by end-July (after completing the last approval steps).
- Planned issuance of the first green bond (U.S.$500 million) later in 2024 and update of the debt management strategy as a communication tool.

### Fiscal policy findings and recommendations
- Staff supports a temporary expansionary fiscal stance, anchored to the two-percent medium-term deficit implicit fiscal rule, to address infrastructure, education, and social needs.
- Temporary up to three percent of GDP fiscal deficits would still ensure medium-term debt sustainability if cast in a medium-term growth strategy with consistent MT fiscal revenue and spending targets and a MT debt strategy.
- Staff stressed importance of returning to the two percent of GDP medium-term fiscal anchor for the overall fiscal balance.
- Tax revenue:
  - Baseline targets increasing fiscal revenue to 13 percent of GDP over time.
  - Staff supports increasing tax collection and opposes legislative discussions to reduce tax collection (e.g., elimination of the ISO (Solidarity) tax, draft Bill 6348).
  - Bill 6348 (as discussed) would give about 3,000 large companies a tax cut of up to 1 percent of their gross revenues, increasing public debt from 27.7 percent (2024 projection) to about 33 percent of GDP over the next five years.
- Key tax and revenue measures recommended:
  - (i) Improve accuracy of budgeted tax revenue projections and tax collection: align SAT internal regulation with quantitative-adjusted criteria of the 2013 SAT Organic Law (Article 27); de-couple annual performance renewal review from tax revenue performance.
  - (ii) Continue efforts to improve tax collection and reduce tax evasion through audits, digitalization, targeting low-tax-collection economic areas and customs smuggling; adopt legislation providing legal protection for SAT auditors and public officials in mandate exercise; use tools to identify fraud (accessing unusual financial transactions under legal safeguards; measuring VAT underreporting gaps); design taxpayer awareness campaign linking efficient spending and increased tax revenue.
  - (iii) Adopt a broad-based updated tax reform in the medium term: broaden the tax base, increase personal income and VAT tax rates, reduce deductions and exemptions, clarify eligibility criteria for general or simplified regimes, and capture residents’ passive foreign income.
- Spending priorities and structural agenda:
  - Keep wage bill contained while improving quality of services; prioritize pro-growth capital investments.
  - Define clear medium-term spending targets for education and health linked to efficiency and results.
  - Scale up investments in infrastructure and targeted social programs with realistic action plans, milestones, and quality controls.
  - Results-based, well-targeted, sequenced MT public investment agenda with roadmap and milestones; publication of multi-annual plans with near- and medium-term targets.
  - Enact legislation to facilitate physical infrastructure investment; amend PPP law (streamline approvals and expand coverage to include education and health) and Free Zone law; reform public procurement and civil service legislation.
  - Eliminate distorting budget process practices: remove Congress-required approval of individual projects and application of legislation requiring new individual projects to be part of the budget process approved by Congress only if previously vetted by Segeplan; pre-vetting of all investment projects before Congress approval recommended.
  - Produce an ambitious, yet realistic, timeline to implement key recommendations of the PIMA/C-PIMA (2023) and Fiscal Transparency (2022) Evaluations.
- Financing and debt management:
  - Given low debt ratios and moderate risks of debt distress, temporarily higher deficits can be partly funded by higher borrowing.
  - Borrowing plans should be designed in the context of the MT debt management strategy to expand markets and complete the sovereign yield curve with a pre-announced annual debt issuance plan.
  - Suggest issuance of green bonds to finance climate mitigation, adaptation, and resilience investments.
  - A well-designed communication strategy on spending and financing plans would encourage investor participation.

### Monetary and exchange rate policy recommendations
- Policy rate path should remain data-driven, with close coordination between monetary and fiscal policy stances; the policy rate serves as a signaling device through the expectations channel.
- Given weight of imported inflation, prospects of an expansionary fiscal stance, and large remittance inflows, a consistent policy rate combined with appropriately priced domestic liquidity management is important.
- Staff recommendations to strengthen monetary and FX frameworks:
  - Strengthen Banguat’s governance and policy framework:
    - Amendments to the 2002 Central Bank Organic Law should explicitly recognize inflation as Banguat’s primary objective and align governance with its 2005-IT mandate.
    - Enforce Article 9 of the Central Bank Organic Law covering monetary policy net deficiencies; prioritize restitution of new losses.
    - Prepare a plan for recapitalization of Banguat’s stock of net deficiencies and assess Banguat’s income model.
    - Prepare Banguat’s financial statements according to International Financial Reporting Standards (IFRS), aligning with private banks’ adoption of IFRS9 by 2026-27.
  - Improve monetary policy transmission and the interbank market:
    - Modernize the reserves requirement framework to strengthen banks' forecasting of reserve requirements and effective liquidity management.
    - Align the policy rate with Banguat's main operations and the price of liquidity; remove the 50bps corridor around the policy rate target applied to liquidity market operations.
  - Prepare for larger investment flows and reduce monetary policy costs:
    - Gradually transfer market risks to the private sector by widening Banguat’s FX intervention bands and letting the exchange rate become the shock absorber, with interventions limited to disorderly conditions.
    - Develop a framework to guide gradual development of FX and hedging markets through new regulations fostering FX risk management and hedging tools and a forward-looking communication strategy guiding future monetary policy changes.
- Staff emphasized preparing and publishing the weight effect study in light of CPI changes to support monetary policy analysis.

*IMF staff report excerpt: "The new administration has an anti-corruption and pro-governance agenda."*

### 26.      The authorities are committed to enhancing their IT-framework, strengthening

### 1gtmea2024001-print-pdf - 26.      The authorities are committed to enhancing their IT-framework, strengthening

### Monetary policy and external buffers
- Inflationary outlook and policy stance:
  - Inflation rate is expected to stay within the target in 2024 and at the band’s mid-point by 2025, in line with the 12- and 24-month inflation expectations surveys.
  - Adjustments to the policy rate will be data-driven, based on an assessment of inflationary risks, and aimed to keep inflation on target.
  - Authorities will be vigilant to FED ́s policy actions, given their impact on Guatemala’s economy.
- External buffers and FX/monetary framework:
  - Guatemala has accumulated strong international reserves—a strong line of defense against external shocks.
  - Authorities committed to further strengthening the monetary policy and FX framework to better cope with potentially large financial inflows.
- Operational improvements for Banguat:
  - Work towards Banguat’s readiness to handle potentially higher investment inflows in the future.
  - Reforms to strengthen the effectiveness of the policy rate and liquidity management by strengthening monetary policy transmission mechanisms and the interbank market.
  - Advocacy for a solvent Central Bank capable of conducting monetary liquidity management, maintaining price stability, and confronting future challenges.

### Financial sector policies and supervision
- Near-term monitoring and regulatory actions:
  - Close monitoring of banks’ balance sheets should continue while the banking sector’s regulatory and accounting frameworks are strengthened.
  - Adoption of new Basel III-type regulations that tighten credit risk to better manage the risks of banks’ aggressive consumer lending strategy is welcome; its two-year gradual implementation calls for strengthening banks’ oversight, especially for banks with large exposures.
  - Congress approval of a revised draft of the 2002 Banking Law and Financial Groups is urgently needed and should include:
    - legal protections for supervisors acting within the scope of their mandate;
    - a mandate to evaluate and respond to risks (credit, market, operational) and vulnerabilities that could affect the financial system;
    - up-to-date tools to implement effective risk-based supervision;
    - a modern resolution and crisis management framework.
  - Implementation of the cybersecurity and data protection laws, and Congress approval of the e-commerce law should not be delayed.
- Communication, disclosure, and market transparency:
  - Spearhead adoption of international accounting standards in banks’ disclosure of their financial statements and balance sheets, now scheduled for 2026-27.
  - Publish the Financial Stability Report with analyses of the risks and resilience of the financial sector to foster transparency and reduce borrowing costs.
- Climate risk and data:
  - Given Guatemala’s exposure to climate risk events, collection of carbon footprint data to quantify exposures should be part of the financial sector’s risk assessments.
- Medium-term framework enhancements:
  - Improve crisis management and safety-net framework for banking groups, with alternative tools (e.g., bridge banks) and contingency funding plans.
  - Adopt an institutional arrangement empowered to make macroprudential policy decisions, with clear mandate, objectives, transparency and accountability.
  - Further development of the macroprudential toolkit to curb a future build-up of systemic risks.
- Financial inclusion and market development:
  - Authorities’ 2024-27 financial inclusion strategy proposes expanding digitalization, improving financial literacy and users’ protections, and expanding banking services access to small and medium-size businesses, youth, women, and rural areas.
  - Staff reforms proposed include development of the secondary debt market, completion of the yield curve, and further digitalization of financial services.
  - Insurance sector needs to deepen significantly in both life and non-life segments and to support climate risk management.
- Observed market frictions and exposures:
  - IPF frictions appear to be not salient: the bid-ask spread is relatively narrow (less than ten basis points), the uncovered interest parity deviations are relatively small, capital inflows are usually small in Guatemala, and net FX exposures in the banking sector are limited and subject to regulatory mismatch limits.

### Governance and anti-corruption agenda
- Early administration actions and diagnostics:
  - Initial steps during first five months in office to strengthen governance and enhance transparency; CNC conducting a detailed institutional diagnostic with actions in MCIV, MSPAS, and MAGA.
  - Review of over 1,400 allegedly irregular public works contracts signed under the previous administration is underway, with some projects reported to the Attorney General’s office.
  - CNC coordinating efforts on whistleblower protection and legislation on the ultimate final beneficial ownership of assets (efforts led by MoF).
  - Legislation on civil service’s appointments and procurement is expected for 2025.
- Recommended comprehensive anti-corruption strategy:
  - CNC should develop and transparently publish the administration’s medium-term anti-corruption strategy, with a roadmap of deliverables and the timeline.
  - Strategy should be comprehensive, multi-year, multi-dimensional, updated periodically, and include measures to:
    - strengthen the procurement framework (e.g., competitive and transparent tenders);
    - publish beneficial ownership information of winners of public contracts;
    - improve the asset declarations legal framework for senior officials and politically exposed persons.
  - Continue strengthening anti-corruption legislation, promote judicial integrity, increase accountability, and enhance independence and effectiveness of anti-corruption institutions.
  - Leverage potential technical assistance from IMF staff, including drafting legislation and conducting an in-depth governance and corruption diagnostic.
- AML/CFT law and implementation:
  - Administration committed to an updated AML/CFT Bill in line with the best FATF standard and submitting it for Congress approval.
  - Staff providing technical assistance via a newly established working group to support revision and timely submission and approval, with support of the Office of the President.
  - At authorities’ request, staff will assist in raising awareness of the revised AML/CFT Law once approved by Congress and in its implementation.
- Authorities’ actions and views:
  - Administration published an Ethics Code for civil servants within the first 100 days; training ongoing and enforcement actions taken.
  - Established a citizen participation body including civil society, indigenous peoples, and the private sector on a parity basis to support, advise, and validate proposals for institutional and legislative reform.
  - Integrity units being established in each executive branch entity to coordinate corruption prevention and receive complaints securely.
  - "Corruption Files" dashboard developed and published to show progress on complaints; administration has filed over 80 complaints with the Public Prosecutor's Office.
  - Administration has a six-pillar strategy defining actions in the coming four years and is committed to publishing a National anti-corruption strategy during their mandate with civil society involvement.

### Supply-side reform agenda and competitiveness
- Strategic approach and priority legislation:
  - Structural reform agenda should be designed under a non-remittance inflows scenario and address long-standing weaknesses that impair competitiveness.
  - Staff recommended adoption of sound landmark legislation, including: a competition law, an infrastructure law, a revision of the PPP law, a ports law, the securities market law, an expropriation law, and the insolvency law.
  - Emphasis on enhancing practices, simplifying processes, and ensuring legal certainty.
- Human capital, connectivity, and informality:
  - Capitalizing on Guatemala's demographic bonus requires a national-led strategy: invest in human capital, connectivity, health, and closing social gaps (see Annex VIII on IADB investments with critical impact).
  - Local administrations and municipalities are key partners in reducing informality and promoting entrepreneurship beyond the capital.
  - Informality hinders access to cheap financing and limits growth; staff encouraged stepping up production value-added, reaping economies of scale, strengthening labor market with better education, labor market flexibility (severance pay, regulations to control for seasonality, part-time work), reducing gender gaps (childcare policies), encouraging access to new technologies and digitalization, and reducing regulatory uncertainty.
- Authorities’ commitment:
  - Authorities embrace a roadmap towards investment grade and higher growth; on June 4th the President led a high-level delegation to New York to explain the administration’s plans.
  - Administration committed to providing opportunities to Guatemalans to stay and work in Guatemala through higher investments in education, health, and infrastructure.

### Staff appraisal, risks, and fiscal stance
- Macro assessment:
  - Guatemalan economy shows stability and soundness: inflation rate on target, ample international reserves, contained fiscal deficits, and a low public debt-to -GDP ratio.
  - Urgent reforms in infrastructure, human capital investment, and governance are needed to support productive sectors and secure higher sustained and inclusive growth; slowing exports and limited foreign investment underscore urgency.
- Risks:
  - Outlook favorable but risks skewed to the downside.
  - Dependence on remittances conditions private consumption to U.S. Hispanic labor market conditions, with greater impact on the most vulnerable population and complicates monetary and exchange rate policies.
  - Other risks: lack of progress on economic agenda, resurgence of social unrest, increased volatility in commodity prices, natural disasters, major cyber-attacks.
  - Successful execution of structural reform agenda could lead to higher inclusive and sustainable growth potential.
- Fiscal policy and revenue needs:
  - With hefty investment needs, Guatemala will need to boost revenue while bolstering the quantity and quality of spending.
  - Tax revenues are still among the lowest in the world, making it difficult to address pressing needs without substantially increasing sovereign debt.
  - Continuity in tax administration, approval of legal protections for public officials acting in their mandate, and improved communication with taxpayers are necessary measures.
  - A structural increase in tax collection will require a comprehensive tax reform and better spending.
  - Country team supports temporary up-to-three percent fiscal deficits, anchored in a two percent deficit over the medium-term.
  - Guatemala's debt-to -GDP ratio is low and projected to be sustainable if the administration’s expansionary fiscal reform agenda is approved in Congress.
  - With domestic financing costs rising, develop the domestic capital market—secondary debt market and yield curve—and communicate with investors.
- Monetary-fiscal consistency and market development:
  - Changes in the leading interest policy rate should continue to be data-driven.
  - Under a reform fiscal policy scenario, consistency in monetary, exchange rate, and fiscal policies will be particularly important.
  - Continue advancing development of FX and hedging, debt, and financial markets to allow the private sector to manage market risks and provide tools for climate risk management.
- Financial sector role:
  - Banking sector remains liquid and profitable and shows resilience to shocks, but close monitoring of vulnerabilities is warranted.
  - Approval and implementation of Superintendency of Banks’ credit regulations and approval of a new banking law updating the 2002 Law on Banks and Financial Groups are urgently needed and should align with international standards.
  - Improve communication with markets through publication of risk assessments and bank balance sheets using international accounting standards (scheduled for 2026-27).

*Source: 1gtmea2024001-print-pdf - 26.      The authorities are committed to enhancing their IT-framework, strengthening*

### 44.      Staff recommends that the next Article IV consultation takes place on the standard 12-

### 1gtmea2024001-print-pdf - 44.

### Recent Economic Developments
- Consumption continued to lead real GDP growth in 2023, with exports declining.
- Confidence index surged since late 2023 (Economic Activity Confidence Index: index series May-17 to May-24 shown).
- Inflation developments:
  - With food prices declining, headline CPI inflation dropped and is now back to the mid-target (Headline CPI Inflation series May-16 to May-24).
- Financial market and policy indicators:
  - Sovereign bond spreads narrowed relative to peers but social unrest and political uncertainty still show in spreads (Sovereign Bond Markets Spread, Index April 3, 2023=100).
  - Banguat’s policy rate remains unchanged (Monetary Policy Interest Rate series showing Guatemala alongside Costa Rica, Dominican Republic, Honduras).

### External Developments
- Current account / reserves:
  - CA surplus has been widening (Figure note).
  - International reserves remain solid (Net International Reserves stock and months indicators shown across projections).
- Trade and remittances:
  - Exports declining in value and volume (Exports series and Volume of exports and services).
  - Large remittance inflows persist (remittances in Current transfers and Net transfers series).
- Capital flows and FDI:
  - Large investment outflows have compensated remittance inflows, reducing exchange rate pressure.
  - FDI remains low despite government outreach.

### Fiscal Sector Developments and Scenarios
- Recent fiscal performance:
  - Overall and primary balances continue below long-term norm; debt levels declining from low levels (Fiscal Balance and Public Debt series).
  - Higher-than-budgeted tax collection explains lower deficits; tax revenue low compared to income and regional peers (Tax Revenue percent of GDP, 2022 cross-country chart).
  - Spending execution in 2023 was higher than historical numbers; infrastructure spending below 1 percent with gaps in transport, communications, and energy sectors.
- Fiscal projections (2024–2029 scenarios: Non-reform, Baseline, Reform):
  - Gross Domestic Product projections: 2024 3.5; 2025 3.4; 2026 3.3; 2027 3.3; 2028 3.3; 2029 3.3 (series across scenarios shown).
  - Total Revenues (percent of GDP) projected to rise under Reform: sample values include 2024 12.4, 2025 12.4, 2026 12.4, 2027 12.4, 2028 12.5, 2029 12.6 (scenario series shown).
  - Total Expenditures (percent of GDP) projected: examples in Reform scenario show increases to 14.7, 14.8, 14.9, up to 15.0 across years.
  - Capital Expenditure (percent of GDP) projected under Reform to rise: sample values include 2024 2.2, 2025 2.4, 2026 2.4, reaching 3.1 in later years.
  - Overall Balance (percent of GDP) under Baseline/Reform shows deficits around -2.0 (series across 2024–2029).
  - Central Government Debt (percent of GDP) trajectory across scenarios shows increases from mid-20s to upper-20s/low-30s (example values: 26.3, 25.0, 23.7, etc., in scenario charts).

- Detailed fiscal 2020–2029 (Table highlights in percent of GDP and levels):
  - Total revenues: 2023 12.5 (percent of GDP); projected 2029 13.0.
  - Total expenditures: 2023 13.7 (percent of GDP); projected 2029 15.0.
  - Primary balance (percent of GDP): 2023 0.4; projected 2029 -0.3.
  - Overall balance (percent of GDP): 2023 -1.3; projected 2029 -2.0.
  - Central Government debt (percent of GDP): 2023 27.2; projected 2029 27.4.
  - Central Government revenues (millions of quetzales): 2023 102,016; projected 2029 162,564.
  - Central Government expenditures (millions of quetzales): 2023 112,246; projected 2029 186,924.
  - Central Government gross borrowing requirement examples: 2024 38,217; 2029 40,474 (Table 2A).

### Monetary Policy and Financial Sector
- Monetary transmission and liquidity:
  - Monetary policy transmission remains weak in domestic currency.
  - Liquidity in the system significantly decelerated in 2023, particularly in U.S.$ given U.S.$-quetzal market rate gaps; reserve requirements declined (Domestic Currency and Foreign Currency Reserve Requirement series).
  - Monetary aggregates and rates:
    - M2 growth series: 2020 18.9; 2021 11.6; 2022 11.1; 2023 6.8; projected 2024 8.9; 2025 8.1; and further projections through 2029 shown.
    - Policy rate and banking rates series: policy rate (EOP) shown alongside lending rates in domestic and foreign currency and US policy rate (series May-17 to May-24).
- Central Bank operations:
  - With large financial inflows, Central Bank Restorations have increased over recent years (Restorations USD bn series).
  - Preference for liquid assets continues to rise (Liquidity Preference Coefficient averages: Avg.2018 0.164; Avg.2019 0.173; Avg.2020 0.189; Avg.2021 0.195; Avg.2022 0.202; Avg.2023 0.213).
- Banking sector developments:
  - Banking sector continues to grow with a traditional banking model.
  - Bank credit concentrated in large corporates and consumption; domestic lending rates barely change with policy rate changes.
  - Quetzalization of credit evident; positive credit gap for consumption credit in local currency (Credit composition and Credit gap charts).
  - Bank balance sheet (Apr 2024, in millions of Quetzales): Assets total 173,930; Cash 18,548; Loans 116,981; Investment 17,757. Liabilities and capital: Deposits 123,413? (figures shown in balance chart; refer to table for exact breakdowns).

- Financial soundness indicators (selected, 2014–2023):
  - Nonperforming loans to total gross loans: 2023 1.8.
  - Regulatory capital to risk-weighted assets: 2023 16.8.
  - Return on assets: 2023 2.2.
  - Foreign currency-denominated loans to total loans: 2023 29.6.
  - Reserves as a percentage of Deposits, in NC: 2023 14.9.

### Social Indicators and Governance
- Social and demographic snapshot:
  - Population 2023 (millions): 17.6.
  - Gini index (2014): 48.3.
  - Percentage of indigenous population (2018): 43.8.
  - Life expectancy at birth (2021): 68.7.
  - Population below the poverty line (Percent, 2023): 55.1.
  - Adult illiteracy rate (2022): 16.0.
  - GDP per capita (US$, 2023): 5,933.
- Social outcomes and comparisons:
  - Poverty Headcount Ratio at national poverty lines and Informal Employment share presented relative to regional peers (charts with country-year datapoints).
  - Infant mortality, adult illiteracy, residential electricity consumer price, and Global Innovation Index components are shown with Guatemala’s comparative positioning across countries.
- Governance indicators:
  - Worldwide Governance Indicators panels for Voice and Accountability; Political Stability and Absence of Violence/Terrorism; Government Effectiveness; Regulatory Quality; Rule of Law; Control of Corruption (percentile ranks and score series 2017–2022).
  - Control of Corruption series contrasted with regional average and confidence intervals (Score, lower score indicate weaker governance).

### Balance of Payments, Reserves, and Projections (Table highlights)
- Summary balance of payments (millions of U.S. dollars):
  - Current account balance: 2023 3,281; projected 2024 3,127; 2029 796.
  - Exports, f.o.b.: 2023 13,035; projected 2024 13,402; 2029 16,235.
  - Imports, f.o.b.: 2023 27,364; projected 2024 29,127; 2029 39,586.
  - Net transfers (of which remittances): 2023 20,819 (remittances 19,780); projected 2029 net transfers 30,185 (remittances 28,599).
  - Foreign direct investment (net): 2023 -888; projected 2029 -1,835.
- Net International Reserves (stock in millions of U.S. dollars):
  - 2023 19,908; projected 2024 21,208; 2029 28,308.
  - NIR in months of next-year NFGS imports: 2020 6.8; 2021 6.8; 2022 6.8; 2023 6.8 (series across projections).

### Key Numeric Highlights from Summary Tables
- Real GDP growth (annual percent change):
  - 2020 -1.8; 2021 8.0; 2022 4.2; 2023 3.5; 2024 3.5; 2025 3.6; projections through 2029 around 3.8–3.3 depending on scenario.
- Consumer prices (average, annual percent change):
  - 2020 3.2; 2021 4.3; 2022 6.9; 2023 6.2; 2024 3.8; projections 2025–2029 4.2/4.0/4.0/4.0/4.0.
- Current account balance (percent of GDP):
  - 2020 5.0; 2021 2.2; 2022 1.3; 2023 3.1; 2024 2.8; projections decline toward 0.5 by 2029.
- Central Government debt (percent of GDP):
  - 2020 31.5; 2021 30.6; 2022 29.0; 2023 27.2; projected 2024 26.8; 2029 27.4.

*Source: National Authorities and IMF Staff Calculations (content unit: 1gtmea2024001-print-pdf - 44).*

### Annex I. External Sector Assessment

### Annex I. External Sector Assessment

### Overall assessment
- The external position of Guatemala in 2023 was stronger than the level implied by fundamentals and desirable policies.
- Current Account (CA) surplus increased to 3.1 percent of GDP in 2023 (from 1.3 percent of GDP in 2022).
- Remittances continued to grow, nearing 20 percent of GDP (about 19 percent of GDP in 2023).
- Trade deficit improved due to lower commodity prices.
- Net International Investment Position (NIIP) remained low despite significant investment needs.
- The real effective exchange rate (REER) moderately appreciated.
- Net reserves continued to grow (U.S.$21.3 billion at end-2023).

### Potential policy responses
- Address long-standing structural gaps (low infrastructure and social spending) to explain and reduce the CA gap.
- Increase infrastructure spending, improve quality of education and health, and reduce social gaps within a sustainable fiscal framework to bolster imports and narrow the CA gap.
- Shift from a remittances-led growth model to a domestic-driven, sustainable, and inclusive growth model with higher capital formation, imports, and foreign investment inflows to soften exchange rate pressures.

### Foreign assets and liabilities: position and trajectory
- NIIP deficit maintained its declining trend in 2023.
- Assets estimated to have increased by U.S.$4.6 billion in 2023; liabilities estimated to have increased by U.S.$1.8 billion in 2023.
- Liabilities as a percent of GDP largely stable due to limited public borrowing and weak capacity to attract foreign capital.
- FDI annual liabilities remained stable at 1.5 percent of GDP (ten-year average, excluding the exceptional 2021 sale surge to about 4.2 percent of GDP).
- In 2023, FDI accounted for about 54 percent of external liabilities; other investment accounted for about 28 percent; portfolio investment comprised the remainder.
- External debt comprised over half of external liabilities in 2023 or around a quarter of GDP.
- Assessment: Current NIIP projected path does not imply risks to external sustainability but requires a CA adjustment to close large CA gaps; absent sustained changes in FDI, portfolio flows, or public external borrowing, NIIP is projected to increase towards balance.

- Key 2023 aggregates (percent of GDP):
  - NIIP: -3.4
  - Gross Assets: 42.7
  - Gross Liabilities: 46.1
  - Debt Assets: n.a.
  - Debt Liabilities: n.a.

### Current account
- CA balance: 2022 = 1.3 percent of GDP; 2023 = 3.1 percent of GDP.
- Remittances: about 19 percent of GDP in 2023 (historically high level).
- Imports of goods and services: 31.6 percent of GDP in 2023 (decreased in value due to lower international commodity prices, despite higher import volumes).
- Exports of goods and services: 16.6 percent of GDP in 2023 (decrease in value because of lower international prices and lower export volumes, mainly due to reduced demand from the U.S.).
- Remittances considered relatively permanent, reflecting a relatively permanent migrant population working in the U.S.
- Outlook: Remittances expected to remain high in 2024 with growth gradually decelerating; total import and export volumes expected to increase in the medium term in line with higher domestic growth and authorities’ structural reform agenda; value effects partially offset by lower trade deflators.

- EBA estimates and gaps (2022 and 2023, percent of GDP unless otherwise noted):
  - CA-Actual (A): 2022 = 1.3; 2023 = 3.1
  - Cyclical contributions (B1): 2022 = -0.5; 2023 = -0.1
  - COVID-19 Adjustments (B2): 2022 = -0.8; 2023 = (no COVID adjust)
  - Adjusted CA (C = A - B): 2022 = 2.7; 2023 = 3.1
  - CA Norm (D): 2022 = -2.8; 2023 = -2.6
  - Adjustments to the norm (E): 2022 = -2.0; 2023 = -2.0
  - Adjusted CA norm (F = D - E): 2022 = -0.8; 2023 = -0.6
  - CA gap (G = C - F): 2022 = 3.5; 2023 = 3.7
  - Contribution of identified policy gaps: 2022 = 1.3; 2023 = 1.6
    - of which: Fiscal Balance contribution: 2022 = 1.0; 2023 = 1.6
  - Elasticity (H): 2022 = 0.26; 2023 = 0.26
  - REER Gap (percent) (I = G / H): 2022 = -13.5; 2023 = -14.2
  - Note: Standard error of the CA norm is 0.6 percent of GDP.

### Real exchange rate (REER)
- REER appreciated by 0.4 percent in 2023.
- REER appreciation since 2010: 48 percent; since 2015: 20 percent.
- Nominal exchange rate (quetzal relative to the U.S.$) was stable and appreciated by 0.6 percent from end-2022 to end-2023.
- Assessment: EBA CA methodology implies the REER is below the level implied by fundamentals by a larger value than in 2023; model implies a REER undervaluation of 14.2 percent under the assumption the CA gap is closed by trade-balance adjustment.

### Capital and financial accounts: flows and policy measures
- Net FDI inflows in 2023: 1.5 percent of GDP (below 2011-15 average of 2.4 percent of GDP).
- Net portfolio investment inflows positive in 2023, reflecting central government issuance of U.S.$1.5 billion Eurobonds in Q2 and Q3.
- Other investment outflows large in 2023: 4.1 percent of GDP (loan amortizations and net asset acquisitions by non-financial corporations and households), driven by positive interest rate differentials with the U.S. and some election-related political uncertainty.
- Assessment: No major macroeconomic risks from capital flows given their relatively low level; solid fiscal stance and low public debt imply central government bond-related portfolio flows do not carry important risk.

### FX intervention and reserves level
- Net International Reserves (NIR, IMF definition): increased from U.S.$18.7 billion end-2022 to U.S.$19.9 billion end-2023 (reversion to increasing trend since mid-2010s).
- Increment largely explained by significant increase in remittances from the United States and improvement in the trade balance.
- Private sector capital outflows, including increased deposits abroad by non-financial corporations and households, softened pressure on reserves and the exchange rate.
- Exchange rate arrangement: Stabilized Arrangement (IMF AREAER classification).
- Assessment of adequacy:
  - End-2023 reserves are 164 percent of the IMF’s metric for Assessing Reserve Adequacy (ARA metric) for countries with stabilized exchange rates like Guatemala.
  - Reserves cover almost seven months of next year’s goods and services imports.
  - Reserves cover about 35 percent of broad money.
  - Reserves cover 395 percent of short-term external debt.
- Despite large accumulation of NIR, FX intervention closed in net sales in 2023 for the first time since 2012.

### Key risks and policy advice (selected points from Risk Assessment Matrix)
- Global risks with high likelihood and medium impact:
  - Intensification of regional conflicts (Gaza/Israel, Russia–Ukraine) — policy: gradually allow the exchange rate to become the shock absorber; deploy targeted social transfers; monetary tightening if price pressures emerge.
  - Commodity price volatility — policy: deploy targeted social transfers while accelerating structural reform agenda.
- Domestic risks of medium likelihood and high impact:
  - An abrupt drop in remittances driven by shifts in U.S. migration policy — policy: accelerate structural reforms and deploy targeted fiscal support to vulnerable groups; liquidity injections may be required.
- Social discontent due to inability to implement reforms and address social/infrastructure gaps — policy: form working coalitions to accelerate structural investment agenda; enhance spending efficiency and transparency; advance anti-corruption and quality-of-spending measures.

*Source: IMF staff estimates.*

### Annex V. Table 1. Guatemala: Update on Implementation of Past Recommendations

### Annex V. Table 1. Guatemala: Update on Implementation of Past Recommendations

### Fiscal Policy
- Recommendation: Improve execution of social spending; use the 2022 unspent cash balances to support the most vulnerable; reduce information gaps to better target support.
- Authorities’ actions:
  - Continued to provide social support by extending temporary and targeted subsidies and increasing social spending in 2022 and 2023.
  - Included measures in the 2023 budget and used 2022 unspent cash balances to support the most vulnerable.
- Staff appraisal / key statistics:
  - Overall budget execution in 2023 increased to 97 percent (historical average of 93 percent).
  - Authorities extended temporary and targeted support for the vulnerable affected by inflationary pressure until mid-2023.
- Recommendation: Strengthen the social policy agenda by enhancing targeting and reducing information gaps.
- Authorities’ actions:
  - Identified insufficiencies in malnutrition programs and data collection.
  - Plan to expand social beneficiaries and improve the data registry.
- Staff appraisal:
  - Further emphasis needed on policies that address long-standing social gaps.
  - Recent program expansions: school meal program increased daily per capita spending and coverage; Ministry of Public Health’s infrastructure expanded in the last 3 years.
  - Plans to increase education investment over the next 4 years focusing on secondary education, facility expansion, and school material supply.
  - In health, increasing investments toward universal, inclusive, and high-quality services, including strengthening healthcare centers and building specialized hospitals.
- Recommendation: Enhance infrastructure governance framework using PIMA/C-PIMA recommendations and further enhance the public finance management framework (PFM).
- Authorities’ actions:
  - Enhanced macroeconomic projections for fiscal policy in the medium term (MT), fiscal risk analysis using the Fiscal Risks Toolkit and natural disaster risks.
  - Made progress on compiling consolidated nonfinancial public sector statistics.
  - Preparing a plan to incorporate PIMA/c-PIMA recommendations.
- Recommendation: Adopt a comprehensive tax reform and address domestic VAT collection gaps.
- Authorities’ actions:
  - Focused on tax collection efforts; tax revenue is expected a gradual increase in the medium-term due to SAT measures implemented in recent years.
- Staff appraisal / key statistics:
  - No comprehensive tax reform has been implemented.
  - Estimated tax gains in 2023 of 0.6 percent of GDP.
- Recommendation: Develop medium-term fiscal framework (MTFF) to ensure alignment between MT revenue, expenditure, and debt strategy; publish and discuss at Congress to add accountability.
- Authorities’ actions:
  - Work underway to ensure better alignment.
  - Administration developing medium-term fiscal and debt management frameworks in line with FTE, PIMA/C-PIMA recommendations.
  - Authorities are working on 2025-2029 MTFF, which would incorporate projected increases in social and infrastructure spending.
- Recommendation: Develop borrowing strategy, complete the sovereign yield curve, ensure consistency with MT projections, broaden the investor base, and develop the secondary debt market.
- Authorities’ actions:
  - Debt Management Office (Crédito Público) is updating the medium-term debt management strategy.
- Staff appraisal:
  - No meaningful progress to date.
  - In 2023, authorities adopted an opportunistic approach to financing based on domestic and foreign market conditions.

### Monetary Policy
- Recommendation: Forward-looking and data-dependent monetary policy; enhance the IT framework (institutional updates, modernization of reserves requirement and OMOs framework, strengthen modeling capacity for monetary policy forecasting).
- Authorities’ actions:
  - Central Bank has continued to closely monitor inflation behavior, forecasts, inflationary expectations, and other macro variables to assure convergence of inflation to the goal in the relevant monetary horizon (24 months).
- Staff appraisal:
  - With a weak interbank market, Banguat continues to play a key (albeit expensive) role in the market.
  - Authorities are assessing how to improve liquidity forecasting for banks using MCM last TA as background.

### Foreign Exchange Policy
- Recommendation: Gradual flexibilization of the FX; pace should go hand-in-hand with technical reforms and market development (hedging and FX) and medium-term reforms (e.g., IFRS-accounting).
- Authorities’ actions:
  - Guatemala has a flexible exchange rate regime, consistent with the Inflation Target framework.
  - Central Bank participation in FX market aims to moderate exchange rate volatility without affecting trend; participation is rule-based, symmetrical, transparent, and well known.
  - Fluctuation margin has been widening over the last years.
  - Implemented a reserve accumulation mechanism to neutralize excess supply of foreign currency from extraordinary remittance flows.
- Staff appraisal / key statistic:
  - Little progress to date on gradual flexibilization.
  - Since January 2024, the FX participation rule band was further widened to 0.95 percent, a step towards a more flexible exchange rate.
- Recommendation: Adopt a strategy to recapitalize Banguat.
- Authorities’ actions:
  - Central Bank continues efforts to get the restitution of net deficiencies before the Ministry of Finance and Congress.
- Staff appraisal:
  - Little progress to date.

### Communication Strategy for Monetary Policy
- Recommendation: Realign communication strategy with institutional reforms at Banguat; reform agenda needs a communication strategy.
- Authorities’ actions:
  - Central Bank’s communication strategy guided by objective of building up and maintaining monetary authority’s credibility.
- Staff appraisal:
  - Little progress to date.

### Financial Sector
- Recommendation: Align AML-CFT law to best international practice and approve by Congress as soon as possible.
- Authorities’ actions:
  - Progress on revising the draft AML/CFT law to finalize and submit to Congress.
- Staff appraisal:
  - AML/CFT Law is stalled in Congress and updates are needed.
  - New administration committed to update the AML/CFT law to international standards, re-drafting and getting it approved.

### Structural Reforms and Governance
- Recommendation: Adopt measures to fasten implementation of infrastructure projects; adopt results-based framework linking initiatives to outcomes; measures to reduce informality.
- Authorities’ actions:
  - Preparing a plan to incorporate PIMA/C-PIMA and FTE recommendations.
- Recommendation: Adopt a plan aligned to recommendations of a future 2023 Governance diagnostic mission.
- Authorities’ actions:
  - National Commission Against Corruption (CNC), replacing former Presidential Commission, launched in late February 2024 with civil society and indigenous groups as participants.
- Staff appraisal:
  - There was no Governance diagnostic mission in 2023.

### Changes to the Consumer Price Index (Annex VI)
- Key changes implemented in 2024:
  - Guatemala switched to a new 2024 CPI index with the reference period of December 2023 (replacing December 2010).
  - Weights in the new index calculated based on the 2022-2023 National Household Income and Expenditure Survey (ENIGH).
  - The 2024 CPI index has been published since February 2024 and will be replaced in early 2025 with an updated one using an average of 2024 as reference and weights adjusted using 2024 information.
- Methodological and composition changes:
  - Expanded number of product prices collected and frequency of collection.
  - Covers 437 products for over 930 goods and services (compared to 441 goods and services in the 2010 CPI basket), grouped into 13 divisions (against 12 divisions in the 2010 CPI basket) for six levels.
- Survey considerations and effects:
  - The 2022-2023 survey captured consumer preferences impacted by the COVID-19 pandemic, affecting weights in the new consumption basket.
  - Weight of food increased to 32.3 percent (compared to 28.8 percent).
  - Guatemala City representation in the CPI by regions increased.
  - New weight distribution and expansion of the sample and quotes should reduce monthly price volatility previously driven by a handful of food prices.
  - INE is working on a weight effect study to judge the impact of changes of weights on inflation.
- Weights of CPI baskets, December 2010 and December 2023 (Percent of total):
  - Food and nonalcoholic beverages: 28.8 / 32.3
  - Alcoholic beverages and tobacco: 0.3 / 2.0
  - Clothing and footwear: 7.4 / 6.1
  - Housing, rent, water, electricity & gas: 12.6 / 11.2
  - Household furnishings and equipment: 5.4 / 6.1
  - Health: 4.2 / 7.1
  - Transportation: 10.4 / 9.9
  - Communication: 5.2 / 5.7
  - Recreation and culture: 5.6 / 2.8
  - Restaurants and hotels: 9.2 / 2.3
  - Education: 3.7 / 7.6
  - Insurance and Financial Services: - / 0.4
  - Personal Care, Social Protection and Other Goods and Services: - / 6.6
  - Miscellaneous & other goods and services: 7.2 / -

### Balance Sheet Exposures (Annex VII)
- Methodology:
  - The Balance Sheet Approach (BSA) summarizes intersectoral exposures as a percentage of GDP; positive values denote net lending, negative values denote net borrowing. Node diameters and arrow thicknesses show relative sizes of imbalances and exposures.
- 2023 vs 2022 summary:
  - Intersectoral exposures declined in 2023 compared with 2022, mainly driven by lower indebtedness from non-financial corporations and government.
  - Households and the rest of the world remain the main net lenders: Households 27.2 percent and the rest of the world 19.1 percent in 2023.
  - Non-financial corporations and government are net borrowers: non-financial corporations 27.2 percent and government 16.9 percent of GDP in 2023.
  - Intersectoral exposures decreased in 2023 mainly due to a reduction in foreign currency assets, which declined from 92 percent of GDP in 2022 to 87 percent of GDP in 2023.
  - Domestic currency exposures increased from 120 percent of GDP in 2022 to 122 percent of GDP in 2023.

*Source: Annex V. Table 1. Guatemala: Update on Implementation of Past Recommendations; Annex VI. Changes to the Consumer Price Index; Annex VII. Guatemala’s Balance Sheet Exposures.*

### Annex VII. Figure 2. Guatemala: Balance Sheet Approach Net Positions (Percent of GDP)

### Annex VII. Figure 2. Guatemala: Balance Sheet Approach Net Positions (Percent of GDP)

### Summary finding
- "In 2022, non-financial corporations and government were the largest net borrower, with households and rest of the world being the largest lenders..."

### Sectoral net-position data (values expressed as percent of GDP)
- Government — Total: 5 5 12 7 1 0 ......- - 11 0 29 12
  - In domestic currency: 5 5 10 7 1 0 ......- - - - 16 12
  - In foreign currency: 0 0 2 0 0 0 - - - - 11 0 13 0
- Central Bank — Total: 5 5 9 1 1 0 0 - 10 - 1 22 27 28
  - In domestic currency: 5 5 9 1 1 0 0 - 10 - 0 0 26 7
  - In foreign currency: 0 0 0 - 0 - - - - - 1 22 1 22
- Other Depository Corporations (Oth. Dep. Corporations) — Total: 7 12 1 9 4 3 1 4 16 16 37 21 6 4 72 71
  - In domestic currency: 7 10 1 9 3 3 1 4 12 9 33 20 0 0 57 56
  - In foreign currency: 0 2 - 0 1 0 0 0 4 7 4 1 6 4 15 15
- Other Financial Corporations — Total: 0 1 0 1 4 1 0 0 0 0 1 0 0 0 6 4
  - In domestic currency: 0 1 0 1 4 1 0 0 0 0 1 0 0 0 5 3
  - In foreign currency: 0 0 - 0 0 0 0 0 0 0 0 0 0 0 1 1
- Nonfinancial Corporations — Total: ......- 0 16 16 0 0 27 17 43 33
  - In domestic currency: ......- 0 9 12 0 0 - - 9 12
  - In foreign currency: - - - - 7 4 0 0 27 17 34 21
- Households — Total: - - - 10 21 37 0 1 ......22 49
  - In domestic currency: - - - 10 20 33 0 1 ......20 44
  - In foreign currency: - - - - 1 4 0 0 ......1 4
- External — Total: 0 11 22 1 4 6 0 0 17 27 ......43 45
  - In domestic currency: - - 0 0 0 0 0 0 - - ......0 1
  - In foreign currency: 0 11 22 1 4 6 0 0 17 27 ......42 45

- Aggregate totals (percent of GDP): 12 29 28 27 71 72 4 6 33 43 49 22 45 43 209 209
  - In domestic currency: 12 16 7 26 56 57 3 5 12 9 44 20 1 0 122 122
  - In foreign currency: 0 13 22 1 15 15 1 1 21 34 4 1 45 42 87 87

### Visualization and interpretation notes (from figure caption)
- Red nodes represent net borrowers and green nodes net lenders.
- The diameter of nodes and thickness of arrows show the relative size of imbalances and exposures, respectively.
- Values are expressed as percent of GDP.
- Caption source attributions within the figure: IIP; CB; ODCs; OFCs; (GFS/MFS estimation).

*Source: IMF STA and Staff elaborations (Annex VII. Figure 2, Balance Sheet Approach Matrix — Guatemala, 2023 - Percent of GDP).*

### Annex X. Capacity Development

### Annex X. Capacity Development

### Overview and CD priorities
- Presents Guatemala’s Capacity Development (CD) priorities under IMF technical assistance.
- Key priorities include: mobilizing revenues, enhancing public financial management, strengthening monetary policy and central bank operations, financial supervision, financial integrity, and data collection and compilation.

### Main CD objectives and workstreams
- Main objective: consolidate past achievements and advance macro-critical reform areas.
- Core CD workstreams:
  - Revenue administration: tax administration diagnostic assessment, strengthening compliance, enhancing tax revenue management.
  - Public Financial Management: strengthen the medium-term fiscal framework with focus on increasing efficiency, transparency, accountability, prioritizing public spending while maintaining fiscal sustainability; includes Public Investment Management Assessment (PIMA) with Climate module (C-PIMA), digital PFM modernization, fiscal impact of financial sector and natural disaster risks.
  - Central Bank Operations and Monetary and Macroprudential Policies: enhance the inflation targeting framework through macroeconomic model development and liquidity forecasting.
  - Financial Supervision and Regulation: tailored implementation of the Basel standards (capital buffers and liquidity buffers), supervisory and regulatory framework on use of Cloud services and cybersecurity.
  - Financial Integrity: strengthen the AML/CFT regime by developing and implementing a risk-based approach to AML/CFT supervision; assist to reform legal and regulatory framework in line with the FATF international standard.
  - Governance, Finance and Real Sector Statistics: compilation and consolidation of public sector balances.

### Capacity Development missions (January 2021 – July 2024, as of June 13, 2024)
- Annex X. Table 1 lists IMF CD missions by workstream and provider over January 2021–July 2024.
- Selected mission highlights by workstream (as listed):
  - Revenue Administration and Customs: multiple missions with CAPTAC-DR and FAD including "Strengthening tax revenue management" (CAPTAC-DR July 2024), "Tax Administration Diagnostic Assessment Tool (TADAT)" (CAPTAC-DR May-Jun 2024), and numerous customs process, anti-fraud, and compliance missions across 2021–2024.
  - Public Financial Management: "Digital PFM modernization" (FAD July 2024); "Public Investment Management Assessment (PIMA) with Climate module (C-PIMA)" (FAD May-June 2023); fiscal risk and forecasting work in 2022–2023; medium-term fiscal framework and treasury support in 2021.
  - Financial Integrity: "Strengthening AML/CFT Risk-based Supervision/Legal and Regulatory Framework" (LEG June 2021 – February 2024).
  - Monetary Policy and Central Bank Operations: "Macroeconomic Model Development" (CAPTAC-DR August-September 2023; November-December 2023; January 2024); monetary policy modeling and evaluation missions in 2021–2023.
  - Financial Supervision and Regulation: Basel capital buffers (CAPTAC-DR February 2024), Basel liquidity (CAPTAC-DR November 2023), cybersecurity (CAPTAC-DR December 2022), and retail credit risk regulation (CAPTAC-DR November 2022).
  - Real and Government Statistics: PSFC compilation and consolidation (STA November 2023), CPI basket update (STA July 2023), GFS/PSDS compilation of public sector balances (STA June 2023), and a sequence of GFS/PSDS and public debt statistics support from 2021–2023.

### Planned CD missions in FY 2025 (As of May 2024)
- Revenue Administration, Customs and Tax Policy:
  - Strengthen risk management; improve taxpayer services for voluntary compliance; strengthen revenue administration management and governance arrangements; improve customs administration functions.
- Public Financial Management and Budget Planning:
  - Fiscal Risks Management: strengthen identification, monitoring, and management of fiscal risks.
  - Coverage and Quality of Fiscal Reporting: improve coverage and quality of fiscal reporting.
  - Assets and Liabilities Management: improve asset and liability management.
  - Public Debt Management: improve medium-term public debt management.
- Monetary and Macroprudential Policies and Central Bank Operations:
  - Monetary and Macroprudential Policies and Inflation Targeting: improve analytical capacity and monetary policy decisions through enhanced modeling and forecasting tools.
  - Central Bank Monetary Policy Operations and Balance Sheet: strengthen the implementation of monetary policy under the existing monetary regime.
- Financial Supervision and Regulation:
  - Cybersecurity: develop/strengthen cybersecurity regulations and supervisory frameworks.
  - Regulation and supervision: develop/strengthen banks’ regulation and supervision frameworks.
- Financial Integrity:
  - AML/CFT Legal and Regulatory Framework: provide assistance and recommendations to strengthen/reform legal and regulatory AML/CFT framework in line with FATF standard.
- Real and Government Statistics:
  - Real Sector – National Accounts (NAR): strengthen compilation and dissemination of NAS - Comprehensive updates and rebasing – NAR.
  - Government Finance Statistics (PSDS): compilation and dissemination; reinforce legal framework; improve periodicity, timeliness, and consistency.

### Fund relations and related financial data (as of June 30, 2024)
- Membership: Joined December 28, 1945, Article VIII.
- General Resources Account:
  - Quota 428.6 SDR Million 100.00 percent of Quota
  - Fund holding of currency 373.97 SDR Million 87.25 percent of Quota
  - Reserve Tranche Position 54.69 SDR Million 12.76 percent of Quota
- SDR Department:
  - Net cumulative allocation 611.70 SDR Million 100.00 percent of Allocation
  - Holdings 529.22 SDR Million 86.52 percent of Allocation
- Outstanding Purchases and Loans: None
- Latest Financial Commitments (selected):
  - Stand-by 04/22/2009 – 10/21/2010 Amount Approved 630.60 SDR Million; Amount Drawn 0.00 SDR Million
  - Stand-by 06/18/2003 – 03/15/2004 Amount Approved 84.00 SDR Million; Amount Drawn 0.00 SDR Million
  - Stand-by 04/01/2002 – 03/31/2003 Amount Approved 84.00 SDR Million; Amount Drawn 0.00 SDR Million
  - Outright loan RFI 06/10/2020 – 05/21/2021 Amount Approved 428.60 SDR Million; Amount Drawn 0.00 SDR Million
- Projected Payments to Fund (SDR Million; based on existing use of resources and present holdings of SDRs, as of June 30, 2024):
  - Charges/Interest: 2024: 1.67; 2025: 3.31; 2026: 3.32; 2027: 3.32; 2028: 3.32
  - Total: 2024: 1.67; 2025: 3.31; 2026: 3.32; 2027: 3.32; 2028: 3.32

### Exchange rate arrangement and Banguat intervention rules
- De jure floating exchange rate arrangement; de facto classified as “stabilized.”
- Since March 1994, arrangement based on an interbank foreign exchange market with authorized financial institutions buying and selling foreign exchange at market-determined rates.
- The Bank of Guatemala (Banguat) may intervene to limit volatility without affecting trend, using foreign exchange auctions with:
  - a symmetric and public participation rule that limits daily volatility and
  - a reserves accumulation rule.
- Effective January 1st, 2022:
  - the fluctuation margin (added to or subtracted from the five-day moving average of the exchange rate) that determines whether Banguat may intervene was kept at 0. 90 percent
  - the maximum daily amount for interventions was increased to US$ 100 million (previously US$50 million).
- Since January 2024, the FX participation rule band was further widened to 0.95 percent.
- Banguat may intervene outside the scope of this rule whenever the nominal exchange rate shows unusual volatility.
- In 2023, despite a large accumulation of NIR, for the first time since 2012, FX intervention closed in net sales.
- As of March 12, 2023, the reference exchange rate was Q7.807 per U.S. dollar.

_Annex X. Capacity Development (Guatemala): IMF staff report excerpt (tables and mission lists as of June 13, 2024; planned missions as of May 2024; Fund relations as of June 30, 2024)._

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_Source: https://www.imf.org/-/media/files/publications/cr/2024/english/1gtmea2024001-print-pdf.pdf_