Country Reports
2024
July 22, 2024
Cameroon: Sixth Reviews Under the Extended Credit Facility and the Extended Fund Facility Arrangements, First Review under the Resilience and Sustainability Facility Arrangement, and Requests for Waivers of Applicability of Performance Criteria, Nonobservance of Performance Criteria, and Modification of Performance Criteria and a Reform Measure
Description: This paper highlights Cameroon’s Sixth Reviews Under the Extended Credit Facility (ECF) and the Extended Fund Facility (EFF) Arrangements, First Review Under the Resilience and Sustainability Facility (RSF) Arrangement, and Requests for Waivers of Applicability of Performance Criteria (PC), Nonobservance of Performance Criteria, and Modification of Performance Criteria and a Reform Measure. The authorities continue to make progress on Cameroon’s economic reform agenda. Going forward, the authorities should accelerate the reform agenda in public financial management, foster structural transformation, and advance climate change adaptation and mitigation efforts. The authorities have made commendable progress under the RSF, which is helping Cameroon integrate climate considerations into its institutional and regulatory frameworks and enhance its capacity to adapt and mitigate the effects of climate change. It is essential to maintain the reform momentum to further strengthen the institutional framework for climate policies, build resilience to climate shocks, and catalyze new investments from donors and the private sector.
July 19, 2024
Panama: Financial Sector Assessment Program - Technical Note on Financial Safety Net, Resolution, and Crisis Management
Description: This paper presents a technical note on financial safety net, resolution, and crisis management in Panama. Key institutional pillars of a financial safety net have not been established in Panama. An explicit industry-funded deposit insurance system should be established as a key element of an effective financial sector safety net in Panama. Superintendency of Banks of Panama (SBP) is the resolution authority for banks in Panama; the SBP relies on strong prudential supervision to avoid bank failures and remove weak institutions. The current approach to bank resolution has not changed since the 2012 Financial Sector Assessment Program and recent technical assistance missions. The legal framework underpinning SBP corrective actions, its overall powers and approach to handling bank insolvency has not changed since passage of the Banking Law in 2008. Panamanian authorities have undertaken a review of the current resolution framework and have determined there is need for improvement. The authorities should build upon current domestic and regional efforts, and develop their internal, interagency, and cross-border coordination and communication mechanisms for bank resolution and crisis management.
July 19, 2024
Panama: Financial Sector Assessment Program - Detailed Assessment of Observance and Basel Core Principles for Effective Banking Supervision
Description: This paper discusses Panama’s Basel Core Principles for Effective Banking Supervision report. The Superintendency of Banks of Panama (SBP) has made significant progress in updating its regulatory and supervisory framework. The liquidity regulations are generally comprehensive; however, the Liquidity Coverage Ratio is calculated and reported on a Level 1 basis and not L2 or group-wide. Off-site analysis occurs on a frequent basis using a comprehensive suite of indicators and data points. The SBP has implemented a framework for credit concentration risk and large exposure limits, but the framework does not apply to all material sources of concentration risk. Regulations issued by the SBP set out a comprehensive set of requirements for a bank’s Board and senior management to be responsible for preparing financial statements that adhere to international accounting standards. Banks must identify and appropriately manage the market risks they face, and the Board of Directors has primary responsibility for establishing policies and procedures to identify these risks.
July 19, 2024
Panama: Financial Sector Assessment Program - Technical Note on Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT)
Description: This paper explains a technical note on Anti-Money Laundering and Combating the Financing of Terrorism in Panama. Enhancing transparency of legal persons and arrangements established in Panama has been a top priority for the country and remains the subject of ongoing reforms. The continuous and large-scale outreach efforts to promote registration in the Registro Único de Beneficiarios Finales (RUBF) are commendable and need to be sustained. The continuous and large-scale outreach efforts to promote registration in the RUBF are commendable and need to be sustained. As a result of concerted efforts to ‘clean up’ the public registry, Panama currently has a large number of suspended legal persons—close to half a million—that require a path to dissolution. In the medium term, the evolving corporate landscape in Panama should be monitored closely, and risk assessments should be updated to reflect emerging business models and potential exposures to new threats and vulnerabilities. The authorities should enact legislation addressing virtual assets and virtual asset service providers that complies with Financial Action Task Force Recommendation 15 and international best practices.
July 19, 2024
Panama: Financial Sector Assessment Program - Technical Note on Macroprudential Framework and Policies
Description: This paper presents a technical note on Macroprudential Framework and Policies in Panama. The institutional framework for macroprudential policy in Panama broadly meets the principles of good design, in particular for the banking sector, but needs to be further operationalized. The quality of design and implementation of macroprudential policies will ultimately depend on a number of factors, including the quality of available data. The macroprudential framework could be further improved in several areas. The report recommends to expand the macroprudential policy toolkit with tools to contain excessive leverage and systemic risks in the corporate sector. The Superintendency of Banks of Panama has made important progress on its public communication on macroprudential policy and has produced an internal draft macroprudential policy strategy document. The SBP is encouraged to continue improving the draft macroprudential policy strategy document and publish it within the planned timeframe, by end-2023. An information and data sharing mechanism has been established across supervisory agencies.
July 18, 2024
Papua New Guinea: Second Reviews Under Extended Arrangement Under the Extended Fund Facility and an Arrangement Under the Extended Credit Facility, and Request for Modification of Quantitative Performance Criteria-Press Release; Staff Report; and Statement by the Executive Director for Papua New Guinea
Description: This paper presents Papua New Guinea’s Second Reviews under Extended Arrangement under the Extended Fund Facility under the Extended Credit Facility, and Request for Modification of Quantitative Performance Criteria. The authorities should now build on these achievements and sustain their reform efforts toward more resilient, inclusive and sustainable growth. In order to address debt vulnerabilities, fiscal consolidation should continue, while creating fiscal space to meet development and climate adaptation needs and devising contingency plans to anticipate the possible materialization of fiscal risks, including from natural disasters. The program performance recorded over the second review period continues to attest to the authorities’ strong commitment to reforms. They have successfully advanced the implementation of their reform agenda, while overcoming technical and institutional capacity constraints. The program will continue to support Papua New Guinea’s reform agenda, help protect the vulnerable and foster inclusive growth, with a focus maintained on strengthening debt sustainability, alleviating foreign exchange shortages, and enhancing governance and anti-corruption frameworks.
July 18, 2024
United States: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the United States
Description: The 2024 Article IV Consultation highlights that the US economy has turned in a strong performance over the past few years. Hysteresis effects from the pandemic did not materialize and both activity and employment now exceed pre-pandemic expectations. Real incomes were diminished by the unexpected rise in inflation in 2022 but have now risen above pre-pandemic levels. Job growth has been particularly fast with 16 million new jobs created since end-2020. However, income and wealth gains have been uneven across the income distribution and poverty remains high, particularly following the expiration of pandemic-era support. Despite the important progress in returning inflation toward its 2 percent goal, the Federal Reserve should wait to reduce its policy rate until at least late 2024. With the economy humming along at an impressive rate the US has not paid a high cost to current monetary policy settings. The evidence suggests that the US economy has largely returned to balance. Labor markets imbalances have been mostly resolved with the economy now appearing to be operating slightly above maximum employment.
July 18, 2024
Germany: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Germany
Description: The 2024 Article IV Consultation highlights that the German economy has begun to recover from the energy-price shock. Gradual economic recovery is expected to continue this year. With wage growth now exceeding inflation, private consumption is expected to drive recovery during 2024. High interest rates have boosted bank profitability, but part of this increase is likely temporary. High interest rates have exposed vulnerabilities in banks’ financing of commercial real estate activity. Risks to growth are broadly balanced, with both positive and negative surprises to consumer and investor sentiment possible. Inflation is expected to slowly fall to around 2 percent as lower wholesale energy prices continue to pass through supply chains and to end-users. Fiscal policy is tight, putting the debt-to-gross domestic product ratio on a downward path, although public investment is also relatively low. In order to stabilize labor supply, the authorities should make it easier for women to work full time. This means expanding access to reliable child- and eldercare services and exploring ways to reduce the effective marginal tax rate on second earners in married couples.
July 18, 2024
Germany: Selected Issues
Description: This Selected Issues paper explores options for Germany to generate additional fiscal room by reducing its public spending and increasing its revenues, while minimizing the associated costs to the economy. The resulting menu of policy options is guided by examining areas where Germany stands out in simple comparisons against other advanced economies. Germany could increase its collection of taxes on real estate. Germany could also generate revenue by closing unnecessary and distortionary loopholes in the treatment of property within income and corporate taxes. These measures and a moderate easing of the debt-brake’s limits could help generate substantial fiscal room for higher public investment and other priority spending needs, as well as for growth-enhancing tax reforms. The appropriate choices among these measures and other options will depend on public preferences across various dimensions, including distributive preferences and views about the appropriate size and role of the state. This paper presents more options than are necessary, meaning that not all of the options need to be adopted. Choices between the various options will depend on social preferences, for example on the size of the government.
July 16, 2024
Canada: 2024 Article IV Consultation-Press Release; and Staff Report
Description: The 2024 Article IV Consultation discusses that the Canadian economy appears to have achieved a soft landing: inflation has come down almost to target, while a recession has been avoided, with gross domestic product growth cushioned by surging immigration even as per capita income has shrunk. Housing unaffordability has risen to levels not seen in a generation, with demand boosted by immigration and supply facing continued challenges to expansion. Canada’s recent introduction of quantitative fiscal objectives is welcome and could be followed by adoption of a formal fiscal framework to anchor fiscal policy even more effectively. The authorities’ multipronged approach to address housing affordability is expected to yield results over time, but further efforts will likely be needed at all levels of government to address the large housing supply gap. Boosting Canada’s lagging productivity growth—including by taking steps to promote investment and R&D, harness artificial intelligence and other advanced technologies (within appropriate guardrails), and capitalize on the green transition—is a key priority for the country’s long-term prospects. Given skills gaps and demographic pressures, immigration remains a critical ingredient.