IMF Executive Board Discusses the Ex Post Evaluation of Exceptional Access Under the 2009 Stand-By Arrangement for GuatemalaPublic Information Notice (PIN) No. 11/122
September 19, 2011
Public Information Notices (PINs) form part of the IMF's efforts to promote transparency of the IMF's views and analysis of economic developments and policies. With the consent of the country (or countries) concerned, PINs are issued after Executive Board discussions of Article IV consultations with member countries, of its surveillance of developments at the regional level, of post-program monitoring, and of ex post assessments of member countries with longer-term program engagements. PINs are also issued after Executive Board discussions of general policy matters, unless otherwise decided by the Executive Board in a particular case.
On September 9, 2011, the Executive Board of the International Monetary Fund (IMF) discussed the Ex Post Evaluation of Exceptional Access Under the 2009 Stand-By Arrangement for Guatemala.1
In mid-2008, Guatemala started to be affected by the deteriorating global economic environment, and its economic outlook was subject to large downside risks. Despite the substantial progress in consolidating macroeconomic stability that Guatemala had made in the years prior to the crisis, vulnerabilities remained. In addition, the external financing requirements for 2009 were projected to be large.
In these circumstances, in April 2009 the Guatemalan authorities requested a Stand-By Arrangement (SBA) with access of SDR 630.6 million (about US$990.2 million, 300 percent of quota), and substantially frontloaded. The program aimed at safeguarding macroeconomic and financial stability, anchoring investor confidence, and providing a cushion for the downside risks from a worsening of the external environment.
Executive Board Assessment
Executive Directors agreed with the conclusions of the Ex Post Evaluation of Exceptional Access under the 2009 SBA with Guatemala. They noted that the SBA was successful in mitigating the adverse impact of the global financial crisis, safeguarding macroeconomic and financial stability, anchoring investor confidence, and providing a cushion for the downside risks of a worsening external environment.
Directors recognized that the authorities’ commitment to the program, the relatively strong implementation of policies, and an improved external environment had contributed to achieving the main objectives of the program. All quantitative performance criteria under the program were met and the planned reviews were completed on time.
Directors concurred that the financing strategy and program design were broadly appropriate, including program conditionality that focused on short-term macroeconomic and financial stability. They also noted that the program provided increased social spending for the most vulnerable segment of the population. Many Directors considered that additional conditionality targeting a revenue-generating tax reform, a medium-term fiscal anchor, and a ceiling on domestic arrears would have strengthened the fiscal framework.
Directors agreed that while program implementation was strong, including complying with conditionality in the financial sector, some important vulnerabilities were not addressed. These included low tax revenues, weak public financial management and budgetary procedures, and weaknesses in the financial system’s prudential and regulatory frameworks. Directors concurred that reducing these vulnerabilities should continue to be key policy priorities.
1 The requirement for ex post evaluations (EPEs) was agreed by the IMF Executive Board in September 2002 for members using exceptional access in capital account crises, and extended to any use of exceptional access in February 2003. The aim of an EPE is to determine whether justifications presented at the outset of the individual program were consistent with IMF policies and to review performance under the program. To do this, EPEs seek to provide a critical and frank consideration of two key questions: (i) were the macroeconomic strategy, program design, and financing appropriate to address the challenges the member faced in line with IMF policy, including exceptional access policy?; and (ii) did outcomes under the program meet program objectives?