Country Reports
2024
March 6, 2024
Principality of Andorra: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Principality of Andorra
Description: After a remarkable recovery, the Andorra economy continues to grow slightly above potential despite significant external headwinds. Headline inflation is elevated amidst persistent core inflation and a tight labor market. The banking sector remains profitable, well-capitalized, and liquid.
March 5, 2024
Botswana: Financial Sector Assessment Program-Technical Note on Stress Testing and Systemic Risk Analysis for Insurers and Retirement Funds
Description: The FSAP mission conducted a risk analysis for large insurance companies and retirement funds. Building on the narrative of the adverse macrofinancial scenario also used in the banking ST, the focus of the analysis in the insurance sector was on solvency. Sensitivity analyses, e.g., interest rate and currency shocks and the default of the largest banking counterparty, complemented the analysis. For retirement funds, future pension values were modeled after a materialization of the adverse scenario in the first two years of the projection horizon. The sample comprised four life insurers, four short-term insurers and four retirement funds, with a market coverage between 80 and 95 percent in each sector. Incomplete reporting data complicated the top-down modelling, specifically with regard to the geographical breakdown of investments for insurers, and the valuation of insurance liabilities.
March 5, 2024
Botswana: Financial Sector Assessment Program-Detailed Assessment of Observance—Basel Core Principles for Effective Banking Supervision
Description: Despite significant progress improving supervisory frameworks since the last assessment in 2007, supervisory powers remain underdeveloped. The current Banking Act was adopted in 1995 and has several deficiencies such as an absence of provisions for consolidated supervision, major acquisitions, and changes in significant shareholding. There is need for a more frequent and comprehensive review of the regulatory framework to ensure they remain relevant to changing industry and regulatory practice. The regulatory framework needs to be updated to align closer with recent Basel norms, guidance, and principles, particularly in the risk management areas specified below. Supervision tools and methodologies and guidance to supervisors need to be augmented as specified below to make supervision more forward-looking and effective. The planned revision of the Banking Act should aim to address gaps and help strengthen powers and support more intrusive supervision.
March 5, 2024
Botswana: Financial Sector Assessment Program-Technical Note on Assessment of Systemic Risks and Vulnerabilities for Banks
Description: Botswana is a small, open economy with a highly concentrated financial sector comprising banks and sizeable non-bank financial institutions (NBFIs). Financial institutions hold adequate capital and liquidity and show moderate profitability. The interconnectedness between banks and NBFIs, and banks’ large exposures to unsecured household debt could increase financial sector vulnerability.
March 5, 2024
Botswana: Financial Sector Assessment Program-Technical Note on Systemic Liquidity Management
Description: The challenges of Botswana’s highly interconnected financial system requires an effective systemic liquidity management framework. Commercial banks’2 funding sources from corporates and non-bank financial institutions (NBFIs) and credit exposures to households create avenues for risk transmission. Corporations and NBFIs (pension funds and insurance companies) constitute the main depositors of the banking sector. Strong linkage also exists between banks and the household sector, as households contribute 21 percent of banks’ total deposits and receive 67 percent of banks’ total lending in the form of unsecured loans.
March 5, 2024
Botswana: Financial Sector Assessment Program-Technical Note on Financial Sector Safety Nets, Crisis Management, and Bank Resolution Framework
Description: The financial safety net framework in Botswana is incomplete, while crisis preparedness and management structures must be expanded.2 The Bank of Botswana (BoB) lacks an emergency liquidity support mechanism for commercial banks, bank resolution and liquidation remain under the Companies Act, and there is no deposit insurance system. A 2016 TA mission3 on “Banking Sector Safety Net and Crisis Management” identified many deficiencies. To date, there has been limited progress in achieving the recommendations.
March 4, 2024
Federated States of Micronesia: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Federated States of Micronesia
Description: Economic growth has been volatile since the Covid-19 pandemic, and inflation reached decade-high levels mainly due to higher prices of imported food and energy. High vulnerability to climate change is also intensifying food security concerns. Despite the weak domestic economy, the fiscal and external current accounts posted large surpluses, partly thanks to foreign grants and taxes paid by foreign firms. The high uncertainty around medium-term external financing and economic prospects diminished significantly with the signing of a new Compact of Free Association (COFA) agreement between the FSM and the United States government, which includes larger grants for the next 20 years and will enable much needed public investment and reforms. However, the agreement still needs to be ratified by the US Congress.
March 4, 2024
Kyrgyz Republic: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Kyrgyz Republic
Description: The new trade and labor migration patterns that emerged since the start of Russia’s war in Ukraine have provided an unexpected boost to growth. Tax revenue increased considerably since 2021, public debt declined below 50 percent of GDP by end-2022, and inflation while still elevated has decelerated into the single digits in 2023. The authorities should take advantage of these generally favorable macroeconomic conditions to strengthen their policy framework and advance structural reforms on multiple fronts to build resilience, support higher and more inclusive growth, and mitigate the risks from heightened global uncertainty.