Press Release No. 26/015

Washington, DC: On January 20, 2026, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV Consultation[1] with Nicaragua and considered and endorsed the staff appraisal without a meeting. The authorities have consented to the publication of the Staff Report prepared for this consultation.

The Nicaraguan economy weathered well multiple shocks since 2018, supported by appropriate macroeconomic and financial policies, substantial pre-2018 crisis buffers, and financing from international financial institutions during the pandemic. Real GDP growth was further sustained recently by favorable terms of trade and high remittances growth. The economy is operating under targeted international sanctions, a geopolitical reorientation of official foreign inflows, and transfers of private property to the state since 2022. Strong fundamentals—low inflation, a declining public debt-to-GDP ratio, twin fiscal and external surpluses, well-capitalized banks and sizeable buffers—should help Nicaragua withstand headwinds from ongoing shifts in the global policy landscape.

The short-term economic outlook remains broadly favorable, with real GDP growth expected to reach 3.8 percent in 2025 and moderate to 3.4 percent in 2026. The medium-term outlook remains subject to high uncertainty, including due to global shifts in trade and immigration policies. Risks are tilted to the downside in the medium term, including from natural disasters, commodity price volatility, weaker global growth, tighter U.S. immigration and trade policies, and stricter and wider international sanctions. Upside short-term risks include more favorable terms of trade and higher public capital spending.  

Executive Board Assessment[2]

In concluding the 2025 Article IV consultation with Nicaragua, Executive Directors  endorsed staff’s appraisal, as follows:

Nicaragua’s economy remains resilient supported by sound macroeconomic policies, amid a shifting global policy landscape. Real GDP grew by 3.9 percent in the first half of 2025, as exports and remittances increased strongly despite global trade policy uncertainty. Inflation remains low, and the financial sector is reportedly well capitalized with adequate liquidity and low NPLs. The fiscal position is strong, with external and overall public debt at moderate risk of debt distress, substantial space to absorb shocks, and a strong debt carrying capacity. The NIIP is sustainable, reserve coverage is adequate, and the external position is assessed as substantially stronger than the level implied by fundamentals and desirable policies.

The short-term outlook remains broadly favorable, while downside risks and high uncertainty dominate over the medium term. Growth is projected to moderate to 3.4 percent in 2026, from 3.8 percent in 2025, reflecting mostly staff’s assumptions of lower remittances, in a context of tighter U.S. immigration policies. Over the medium term, staff expect real GDP growth to stabilize at around 3½ percent, supported by public investment and an expanding labor force. Foreign reserves are expected to remain ample, albeit growing at a slower pace as CA surpluses narrow. Upside short-term risks include more favorable terms of trade and higher public investment. Downside risks stem from commodity price volatility, weaker global growth, and tighter U.S. immigration and trade policies. Natural disasters, and stricter and broader international sanctions could also impact negatively growth.

Staff welcome the authorities’ continued commitment to safeguarding fiscal sustainability and building buffers while supporting growth and recommend additional measures. Staff broadly support the 2026 capital and human development spending plans, and advise proceeding cautiously with budget execution in line with staff’s baseline scenario, considering downside risks, high uncertainty, limited external financing, and persistent imbalances in the pension system. Staff also recommend enhancing tax collection and better targeting SOE transfers to create space for higher priority public investment and targeted social spending. In a downside scenario, targeted and time-bound support to vulnerable groups could be deployed.

Monetary policy should continue preserving price and external stability and the BCN should continue strengthening monetary policy transmission. The ongoing easing of the monetary policy stance and the announced rate of crawl of 0 percent for 2026 are appropriate given  external conditions and the macroeconomic and financial policy mix. Staff recommend continuing to foster the use of local currency and deepen capital markets to enhance monetary policy effectiveness. In a downside scenario, the authorities should stand ready to increase the monetary reference rate and recalibrate the rate of crawl, if needed.

Staff support the implementation of the comprehensive set of financial laws approved in early 2025 and recommend further strengthening crisis preparedness. The new laws increased capital buffers and strengthened the recovery and crisis resolution framework. Further efforts are needed to prepare the analysis needed for activating the CCB and contingency plans in the crisis resolution framework. Staff also recommend standing ready to release CCBs in a downside scenario of financial distress and adjusting further the financial regulations in consultation with banks to ensure they do not impose an excessive regulatory burden.

Staff recommend boosting human and physical capital and diversifying exports. Stronger social safety nets and expanded active labor-market policies would support a higher contribution of labor to medium-term growth, along with the expected public investment in transport and health. Staff welcome efforts to expand export markets and recommend working with export firms to support the skills needed to scale up into higher value-added products.

To sustain higher medium-term growth, staff recommend strengthening the business climate and economic governance, especially significantly improving the rule of law. To improve competitiveness and increase private investment by reducing the cost of doing business, it is important to strengthen the business facilitation with economic agents and maintain fiscal integrity. It is also crucial to increase the transparency, accountability, and effectiveness of administrative and judicial processes related to private property rights (including of third parties), which includes guaranteeing all adequate, effective, and fair legal recourse. On economic governance, staff recommend continuing to increase fiscal transparency by publishing consolidated financial statements and audit reports, coordinating with private and NPOs to better understand AML/CFT risks, and increase the reporting of suspicious transactions, as needed. Staff also recommend further strengthening the anti-corruption framework by allowing the automatic publication of asset declarations of top-level officials and ensuring effective management and oversight of all property of the state.

Data provided to the Fund remains broadly adequate for surveillance with some shortcomings. Staff recommend expanding data sources, improving the timeliness of key statistics such as poverty rates, and enhancing the publication of detailed balance of payments data, including remittances.

[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] The Executive Board takes decisions under its lapse-of-time procedure when the Board agrees that a proposal can be considered without convening formal discussions.