Category: English Language

Source: IMF – News in Russian

June 4, 2025

End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF’s Executive Board for discussion and decision.

Washington, DC: An International Monetary Fund (IMF) team led by Justin Tyson visited Malawi from May 22 to June 3 to hold meetings with the Malawian authorities and other counterparts from the public and private sectors and civil society for the 2025 Article IV consultation. Discussions focused on policies to restore macroeconomic stability, and the structural reforms needed to foster strong, inclusive, and durable growth.

Context, Macroeconomic Outlook, and Risks

The Malawian economy has been buffeted by several shocks. Real GDP growth declined slightly to 1.8 percent in 2024 as a drought affected agricultural production, while foreign exchange and fuel shortages dampened economic activity. Over 20 percent of the population is facing high levels of food insecurity, up five percentage points over 2023. Headline inflation began easing in late-2024 and reaccelerated in early-2025 in the context of maize prices rising to historical levels, elevated money growth and an increasing official-parallel exchange rate spread.

Fiscal and monetary policy has remained too accommodative. The FY2024/25 (April/March) fiscal balance fell short of budget targets and deteriorated relative to the previous year as revenue underperformed and expenditure ceilings were exceeded. Persistent and elevated domestic fiscal financing has fueled money growth and inflation, which in turn exerts pressure on the exchange rate. Monetary policy did not tighten sufficiently in the context of elevated government domestic borrowing. The broader reform momentum has been slowing.

Consequently, domestic, and external imbalances worsened. The current account deficit expanded further to about 22 percent of GDP and gross reserves are critically low, pointing to an overvalued exchange rate. The official-parallel spread is wide and may reflect other factors beyond fundamentals. Malawi remains in external debt distress and domestic debt is growing.

The macroeconomic outlook is subdued and dependent on the agricultural sector output and foreign grant support. Under current policies, the mission expects real GDP growth to be 2.4 percent in 2025 and gradually increase to 3.4 percent over the medium term. Inflation is projected to average 29 percent in 2025 and settle at around 14 percent over the medium term. The current account deficit is projected to improve to about 17 percent of GDP in 2025 based on lower fuel prices and a rebound in key exports. General elections, scheduled for September, have reinforced political-economy constraints to macroeconomic adjustment. After the expiry of the ECF arrangement, the Malawian authorities are designing a homegrown reform program.

Risks are tilted to the downside. Lower-than-anticipated grant inflows and food production, additional global trade tensions, and delayed reforms could deepen macroeconomic instability. Greater-than-expected mining investment and production constitute an upside risk.

Fiscal Policy

Returning to a sustainable fiscal adjustment path is a priority. Tackling the rising interest bill will create space for domestically-financed investment and pro-poor spending, while also ameliorating the sovereign-bank nexus.

Domestic revenue mobilization is urgently needed to achieve fiscal sustainability in an equitable way. This could be achieved through a combination of broadening the tax base and tax policy instruments (e.g., reducing exemptions, and personal and corporate income tax reform). Improving wage bill efficiency and rebalancing expenditures towards human capital and social protection could support these efforts.

Staff welcomes public financial management improvements, which remain critical for strengthening fiscal governance and building public trust. The authorities have made progress in expanding the coverage of the Integrated Financial Management and Information System (IFMIS), bank reconciliations, and increasing the efficiency of public investment. Reform efforts should continue to, inter alia, enhance budget development, execution, and reporting, improve the procurement system, and strengthen State Owned Enterprises (SOE) oversight.

Decisive steps are needed to restore debt sustainability. The authorities have achieved some progress with their bilateral creditors and continue to engage with their external commercial creditors to ensure that external debt is sustainable. Tangible progress on external debt restructuring could pave the way for new concessional inflows. This should be supported by steps to reduce the cost of domestic borrowing.

Price Stability and Exchange Rate Policy

Tighter fiscal and monetary policies would support disinflationary efforts and ease pressure on the exchange rate. High inflation hurts the economy in general, but especially the poorest and most vulnerable. A combination of more restrictive monetary policy and an urgent fiscal adjustment, including enhanced reporting on budget execution, could reduce broad money growth, support policy credibility and re-anchor inflation expectations. Structural constraints may also be contributing to entrenched inflation expectations.

A unified and market clearing exchange rate is critical to reducing imbalances and supporting the authorities’ growth objectives. The current regime with a large and volatile spread between the parallel and official rate creates distortions, impedes exports, subsidizes some imports, and encourages informality and tax avoidance. Foreign direct investments and official aid flows are discouraged, and domestic revenues reduced. Eliminating these imbalances requires unifying the official and parallel exchange rates, at a level reflecting fundamentals and discounting speculative factors, and stabilizing the foreign exchange market. Consistency between the de facto exchange rate regime, the monetary policy framework and fiscal policy are needed to ensure sustainable growth.

Financial Sector Policies

The banking sector’s credit and foreign exchange risks should be monitored to preserve financial stability. While the sector is well-capitalized, liquid, and profitable, its significant exposure to government borrowing and the net foreign liabilities position within the banking sector require continued careful monitoring.

Increased banking sector credit to the private sector would support economic growth. Fiscal adjustment would reduce crowding out of private sector due to public borrowing and support export-oriented investment. In addition, a lower inflation and interest rate environment would further support credit to businesses.

Structural Reforms

Improving the investment climate would help attract investment, diversify the economy, and move up the value chain. Sustained multi-year prudent fiscal policies and removing price distortions (e.g., re-activating the automatic fuel price mechanism) would bolster policy credibility and strengthen external competitiveness. Addressing key structural impediments to growth would durably support efforts to raise productive capacity, reduce inflation and improve self-sustainability, as envisaged under the authorities’ Agriculture, Tourism, Mining and Manufacturing (ATMM) policy umbrella.

Further strengthening governance measures will support confidence in public service provision. Despite government reform efforts, including the two National Anti-Corruption Strategies, gaps persist. For example, the public procurement process and SOE operations would benefit from greater transparency and less discretionary decision-making.

The IMF mission team thanks the Malawian authorities and all other interlocutors for the candid discussions and their hospitality.

https://www.imf.org/en/News/Articles/2025/06/04/pr-25175-malawi-imf-completes-2025-art-iv-mission

MIL OSI

Source: IMF – News in Russian

June 4, 2025

Tbilisi: An International Monetary Fund (IMF) mission led by Mr. Alejandro Hajdenberg conducted discussions for the 2025 Article IV consultation with Georgia from May 21 to June 4, 2025, in Tbilisi. At the end of the visit, Mr. Hajdenberg issued the following statement:

Georgia’s economy has been remarkably resilient despite heightened domestic and geopolitical uncertainty. Growth approached double digits in 2024, is projected at 7.2 percent this year, and is expected to converge to its long-term trend of 5 percent. Inflation has ticked up but remains close to its 3 percent target. Meanwhile, foreign exchange reserves have recovered from last year’s lows and continued fiscal discipline has contributed to a further decline in public debt. However, risks to the outlook are elevated and challenges persist due to still high structural unemployment and income inequality. In this context, the National Bank of Georgia (NBG) should prioritize building additional reserve buffers while monitoring potential financial sector risks. Strengthening NBG’s governance and independence remains central to macroeconomic stability. Fiscal reforms should aim to raise additional revenues to finance development priorities, improve spending efficiency, and contain fiscal risks. Structural reforms should focus on sustaining strong growth and making it more inclusive, including by enhancing labor market opportunities and outcomes.

Recent economic developments, outlook, and risks

Economic activity has remained robust. Real GDP grew by 9.4 percent in 2024 despite domestic political tensions. Growth was driven by consumption, marking a shift from previous years when investment and net exports were the main contributors. Tourism rebounded to pre-Covid levels, while the information and communications technology (ICT) and transport sectors remained key drivers of growth, continuing to benefit from high skilled migrants and transit trade. The unemployment rate continued to decline, albeit remaining structurally high. With strong momentum continuing in the first four months of 2025, growth is projected to moderate slightly to 7.2 percent for this year before converging to its medium-term potential rate of 5 percent.

Inflation has returned to target after undershooting for two years. Headline inflation averaged 1.8 percent over 2023 and 2024 but rose to 3.5 percent year-on-year in May 2025, mainly due to increasing food prices. Core inflation, however, remains subdued, with the NBG keeping the policy rate unchanged at 8 percent since May 2024. Inflation is projected to average 3.4 percent in 2025 and to converge to the NBG’s 3 percent target in 2026 along with easing domestic demand.

The current account deficit narrowed in 2024 to 4.4 percent of GDP, with a similar projection for 2025, but reserve coverage remains below adequate levels. The improvement in 2024 was driven by lower imports, partly reflecting lower oil prices. Foreign direct investment (FDI) declined for the second straight year, in part reflecting the absence of new large greenfield projects. Gross international reserves have fallen from a peak of $5.4 billion in August 2023 to $4.5 billion as of April 2025––equal to 80 percent of the Fund’s Assessment of Reserve Adequacy (ARA) metric. Recent favorable inflows have allowed the NBG to offset the sizeable foreign exchange sales made before the October parliamentary elections.

The fiscal deficit held steady at 2.4 percent of GDP in 2024, despite it being an election year, and is expected to remain unchanged in 2025. Robust tax revenues––supported by strong growth, tax policy measures in the financial and gambling sectors, and improved revenue administration––have helped finance social and capital spending. Amid stronger-than-expected economic activity, the 2025 budget target of 2.5 percent of GDP deficit is well within reach. Public debt, at 36 percent of GDP, has returned to pre-pandemic levels, with an increasing share denominated in local currency. The USD 500 million Eurobond maturing in April 2026 is expected to be rolled over smoothly.

While uncertainty remains exceptionally high, risks to the outlook appear broadly balanced. The direct impact from tariffs imposed by the U.S. is limited as the U.S. accounts for only 2 percent of total exports—mainly ferroalloys, which are exempt. However, the indirect effects of heightened global trade tensions could be more significant. Weaker investor confidence and slower trading partner growth pose negative risks, but Georgia could benefit from lower oil prices and sustained trade diversion through its territory. A resolution of the war in Ukraine could unwind some gains linked to migration and transit trade but increased regional stability and reconstruction in Ukraine could be offsetting positive factors. Persistent domestic political uncertainty and sanctions affecting Georgia could dampen FDI, discourage tourism, and further pressure the lari. Healthy fiscal and financial sector buffers mitigate these risks.

Monetary and exchange policies

The NBG should maintain a broadly neutral policy stance while remaining flexible and data driven to ensure inflation expectations remain anchored. Although wage and employment growth have moderated and business confidence has weakened, heightened global uncertainty warrants caution in considering further policy rate cuts, particularly as the recent increase in domestic food prices may not prove transitory. Should inflationary pressures persist, a tightening of the policy stance may be warranted.

Exchange rate flexibility, opportunistic reserve accumulation, and monetary policy communication should be enhanced. Efforts to rebuild reserve buffers should be sustained while allowing the exchange rate to act as a shock absorber. The NBG should continue to strengthen monetary policy transmission, effectiveness, transparency, and credibility. Communication of monetary policy should be strengthened by clarifying the NBG’s assessment of the balance of risks and how this informs policy decisions.

Strengthening NBG governance and independence remains central to macroeconomic stability. The filling of the board vacancies and the governor position is a welcome first step. Efforts should now focus on amending the NBG law to: (i) ensure a non-executive majority on the NBG’s oversight board, (ii) limit the possibility of discretionary financial transfers to the government, and (iii) clarify and further strengthen [the NBG succession framework and] board member qualification criteria. Moving from a presidential to a collegial decision-making model is also advisable.

Fiscal policy

With public debt at sound levels, maintaining a broadly neutral policy stance over the medium term is appropriate. A fiscal deficit of 2.3–2.5 percent of GDP would help stabilize the debt-to-GDP ratio near its current level. The shift toward domestic debt should proceed carefully, avoiding crowding out the private sector and monitoring borrowing costs and risks linked to a stronger sovereign-bank nexus. While good progress has been made, further tax policy and administration reforms that broaden the tax base and streamline tax expenditures—supported by a stronger medium-term revenue strategy—are needed to secure revenue for spending priorities.  

There is considerable scope to enhance spending efficiency and further strengthen public investment management (PIM). Despite elevated levels of public investment, infrastructure quality remains below that of many emerging market peers, highlighting the need for more effective implementation of PIM processes, building on recent years’ improvements. Spending on education and health could be more efficient, to achieve better outcomes at similar expenditure levels. Spending reviews could help in this regard. Social assistance is relatively generous but targeting could be improved to prioritize the most vulnerable households.

Sustained efforts are needed to manage fiscal risks and increase fiscal transparency. The authorities have taken significant steps in enhancing the Ministry of Finance’s financial oversight of state-owned enterprises (SOEs), and maintaining this momentum will be important. Efforts should focus on legislation that would separate the state’s shareholder, regulatory, and policy functions beyond the energy sector, where implementation has recently taken place, and strengthen the corporate governance of SOEs. The authorities should address gaps in the coverage of fiscal reporting, particularly from non-market SOEs with significant fiscal risks.

Financial sector

Continued vigilance and reforms will help address long-standing and emerging financial sector risks. The banking system remains well capitalized and profitable, and the implementation of the IMF’s 2021 Financial Sector Assessment Program (FSAP) recommendations is nearly complete. Key priorities going forward include enhancing the consolidated supervision of financial groups—particularly non-bank subsidiaries and cross-border activities, operationalizing a fully-fledged bank resolution framework, and improving competition in financial services. The NBG continues to implement its long-term dedollarization policy to support financial stability, and recently raised the FX loan threshold for unhedged borrowers further to GEL 750,000. Nevertheless, the share of unhedged foreign currency bank loans is still high, and the deposit dedollarization trend was interrupted amid heightened political uncertainty. Banks—especially smaller ones—have faced lari funding pressures, and the cost of funding has risen, potentially weighing on profitability. Consumer loans have grown rapidly, while riskier nonbank financing—including foreign currency bond issuances by real estate developers—has increased considerably. Neither risk is assessed to be systemic at this stage, but continued close monitoring is warranted.

Structural reforms

Structural reforms are needed to sustain high growth and make it more inclusive and job rich. Potential growth remains constrained by structurally high long-term and youth unemployment, low educational attainment, infrastructure bottlenecks in the transport and logistics sectors, and low sectoral productivity, especially in agriculture. An aging population, outward migration, and informality pose challenges for the labor market, along with persistent income inequality. Better targeting of agricultural support, improving teacher quality, and expanding vocational training would help raise rural labor force participation and facilitate the integration of workers into the formal economy. Remittances and return migration could be better leveraged to boost productive investments and knowledge transfers from returning migrants. Continued investment in transport and logistics infrastructure, as well as coordination with regional partners to harmonize fees and procedures, are important to support long-term competitiveness. Finally, the authorities should enhance judicial independence and strengthen the autonomy of the Anti-Corruption Bureau to improve the business environment.

The mission team would like to thank the Georgian authorities and other counterparts for their close collaboration, candid and informative discussions, and warm hospitality.

Table 1. Georgia: Selected Economic and Financial Indicators, 2024–28

 

	2024	2025	2026	2027	2028
	Actual Projections
National accounts and prices	(annual percentage change; unless otherwise indicated)
Real GDP	9.4	7.2	5.3	5.0	5.0
Nominal GDP (in billions of laris)	91.9	102.5	111.7	121.5	131.9
Nominal GDP (in billions of U.S. dollars)	33.8	36.7	39.2	41.4	43.6
GDP per capita (in thousands of U.S. dollars)	9.1	9.9	10.6	11.2	11.8
GDP deflator, period average	3.8	4.1	3.5	3.5	3.5
CPI, period average	1.1	3.4	3.1	3.0	3.0
CPI, end-of-period	1.9	3.6	3.0	3.0	3.0
Consolidated government operations	(in percent of GDP)
Revenue and grants	28.0	27.7	27.8	27.7	27.6
o.w. Tax revenue	25.3	25.0	25.6	25.6	25.6
Total Expenditure	30.3	30.0	30.1	29.9	29.8
Current expenditures	22.5	22.6	22.5	22.5	22.5
Net acquisition of nonfinancial assets	7.7	7.4	7.5	7.5	7.3
Net lending/borrowing (GFSM 2001)	-2.3	-2.3	-2.3	-2.3	-2.2
Augmented net lending/borrowing 1/	-2.4	-2.4	-2.4	-2.4	-2.3
Public debt	36.1	34.7	34.1	34.3	34.5
o.w. Foreign-currency denominated	25.2	23.1	22.0	21.7	20.9
Money and credit	(annual percentage change; unless otherwise indicated)
Credit to the private sector	18.5	13.7	9.0	8.7	8.6
In constant exchange rate	17.0	15.5	8.5	7.4	7.3
Broad money	14.5	13.3	11.5	11.3	11.2
Excluding FX deposits	10.4	13.7	11.9	11.7	11.6
Deposit dollarization (in percent of total)	52.7	52.1	51.9	51.7	51.4
Credit dollarization (in percent of total)	42.9	42.5	42.1	41.7	41.3
Credit to GDP (in percent) 2/	66.0	67.4	67.4	67.4	67.4
External sector	(in percent of GDP; unless otherwise indicated)
Current account balance (in billions of US$)	-1.5	-1.6	-1.8	-2.0	-2.1
Current account balance	-4.4	-4.4	-4.6	-4.8	-4.8
Trade balance	-19.2	-18.9	-19.1	-19.2	-19.3
Terms of trade (percent change)	-2.8	-0.2	0.1	-0.3	0.5
Gross international reserves (in billions of US$)	4.4	4.7	4.9	5.5	6.2
In percent of IMF ARA metric 3/	79.6	81.1	82.4	88.0	95.5
In months of next year’s imports	2.7	2.6	2.6	2.7	2.9
Gross external debt	66.8	62.4	58.5	55.9	53.0
Sources: Georgian authorities; and Fund staff estimates.
1/ Augmented Net lending / borrowing = Net lending / borrowing – Budget lending.
2/ Banking sector credit to the private sector.
3/ IMF’s adequacy metric for assessing reserves in emerging markets.

https://www.imf.org/en/News/Articles/2025/06/04/06042025-mcs-georgia-staff-concluding-statement-of-the-2025-article-iv-mission

MIL OSI

Source: IMF – News in Russian

June 3, 2025

End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF’s Executive Board for discussion and decision.

• Brazil’s economy has grown strongly over the past three years, surprising on the upside. Inflation rebounded in 2024 amid strong demand, a rise in food prices, and currency depreciation, exceeding the target tolerance interval. IMF staff expects growth to moderate in the near term as inflation converges to target, and then strengthen to 2.5 percent over the medium term.
• The pivot to a monetary policy tightening cycle in September 2024 was appropriate and consistent with bringing inflation and inflation expectations back to the 3 percent target. In the context of heightened global policy uncertainty and inflation expectations above target-consistent levels, maintaining flexibility on the pace and length of the hiking cycle is prudent.
• The authorities’ efforts to continue improving the fiscal position, while trying to meet social spending and investment needs, are welcome and further steps are warranted. Phasing out costly and inefficient tax expenditures, enhancing revenue administration, and tackling budget rigidities would open space for priority investments, support public debt sustainability, and facilitate a lower path of interest rates.
• The authorities are advancing their sustainable and inclusive growth agenda. Implementation of the landmark VAT reform is proceeding and a personal income tax reform that aims to enhance equity is under discussion in Congress.

Washington, DC: An International Monetary Fund (IMF) team, led by Daniel Leigh, conducted discussions for the 2025 Article IV Consultation with the Brazilian authorities and consulted with other stakeholders during May 20 – June 2, 2025. At the conclusion of the visit, Mr. Leigh issued the following statement:

“Brazil’s economy has grown strongly over the past three years, surprising on the upside. Staff projects a moderation in growth from 3.4 percent in 2024 to 2.3 percent in 2025, amid tight monetary and financial conditions, a scaling back of fiscal support, and heightened global policy uncertainty. Inflation is expected to reach 5.2 percent by end-2025, before gradually converging to the 3 percent target by end-2027. The external current account deficit reached 2.8 percent of GDP in 2024, on the back of strong exports and rising imports due to stronger economic activity.

“Over the medium term, growth is forecasted to recover to 2.5 percent, supported by the normalization of monetary policy and supportive structural factors, notably the implementation of the efficiency-enhancing VAT reform and the acceleration in hydrocarbon production. Additional structural reforms and implementation of the Ecological Transformation Plan would further boost medium-term growth prospects.

“Risks to the growth outlook are tilted to the downside amid heightened global policy uncertainty. A sound financial system, adequate FX reserves, low reliance on FX debt, large government cash buffers, and a flexible exchange rate continue to support Brazil’s resilience.

“The Central Bank of Brazil’s (BCB) pivot to a tightening cycle in September 2024 was appropriate and consistent with bringing inflation and inflation expectations back to the 3 percent target. Above-target near- and medium-term inflation expectations, as well as a widening positive output gap, supported the case for the BCB’s rate hikes. In the context of heightened global policy uncertainty and inflation expectations above target-consistent levels, maintaining flexibility on the pace and length of the hiking cycle is prudent.

“The authorities’ efforts to continue improving the fiscal position, while trying to meet social spending and investment needs, are welcome and further steps are warranted. To put public debt on a firmly downward path, open space for priority investments, and facilitate a lower path of interest rates, staff recommends a sustained and more ambitious fiscal effort, supported by an enhanced fiscal framework, revenue mobilization, and spending measures. Implementation of the landmark 2023 VAT reform is expected to significantly simplify the tax system and boost productivity, and efforts rightly aim to secure revenue-neutrality.

“The financial sector was resilient in 2024 and is expected to remain so amid higher interest rates. The authorities are implementing regulatory changes aimed at further strengthening financial sector resilience. Reforms to facilitate a reduction in household leverage are needed. At present, public banks appear well-capitalized, profitable, and liquid, and have been paying dividends to the government. Lending by public banks should continue to focus on addressing market failures, such as supporting long-term investment.

“The BCB continues to advance its financial innovation agenda. Pix, the instant payment system developed by the BCB, now accounts for 49 percent of all electronic payments in Brazil—the most popular method, reflecting its low costs and immediate settlement. The pilot of Brazil’s Central Bank Digital Currency, Drex, has entered the second phase, where additional use cases and integration with external platforms will be tested and enhanced, while continuing to explore data privacy solutions.

“The authorities are delivering on their inclusive and sustainable growth agenda. Structural reforms together with expanding hydrocarbon production have lifted Brazil’s medium-term growth prospects. Additional structural reforms and implementation of the Ecological Transformation Plan would further foster productivity, investment, and job-rich growth, while extending recent gains in social inclusion. Brazil has made notable progress in reducing deforestation in recent years and is on track to meet its Nationally Determined Contribution (NDC) targets.

“The team would like to thank the authorities and private sector representatives for their support, hospitality, and constructive dialogue.”

https://www.imf.org/en/News/Articles/2025/06/03/pr-25174-brazil-imf-completes-2025-art-iv-visit

MIL OSI

Source: IMF – News in Russian

June 2, 2025

• Growth is expected to decelerate to 2.5 percent in 2025 and stabilize at 3 percent in the medium term as Cyprus shifts towards more investment-driven growth.
• The fiscal surplus reached an impressive 4.3 percent of GDP in 2024, while public debt declined to 65 percent of GDP. Fiscal policy should continue to prioritize debt reduction to further build buffers against potential shocks.
• The banking sector boasts substantial capital and liquidity buffers, with financial risks appearing well-contained. The recent tightening of the macroprudential policy stance, will further enhance these financial buffers.

Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed the Article IV Consultation for Cyprus and endorsed the staff appraisal without a meeting.[1] The authorities have consented to the publication of the Staff Report prepared for this consultation.[2]

In 2024, Cyprus’s growth accelerated to 3.4 percent—one of the highest rates in the euro area (EA)—driven by a strong tourism season, continued Information and Communication Technology (ICT) sector expansion, and robust public and private consumption. While inflation has remained volatile, it has generally decreased, with headline inflation falling to 2.1 percent by March 2025. Fiscal performance continues to be very strong, with the fiscal surplus increasing to 4.3 percent of GDP in 2024, supported by robust tax revenues. As a result, public debt has declined to 65 percent of GDP by the end of 2024, while cash buffers remain large. Financial conditions remain tight, accompanied by subdued credit growth. Nevertheless, the banking sector possesses sizable capital and liquidity buffers, and overall banking sector risks appear contained.

Growth is expected to moderate to 2.5 percent in 2025 before reaching 3 percent in the medium term, driven by higher investment and structural reforms. Inflation is anticipated to hit the 2 percent target later this year, supported by moderating growth and lower oil prices. Near-term risks are tilted to the downside, including from elevated uncertainty from global trade tensions. In contrast, longer-term risks are more balanced, with risks on insufficient progress on structural reforms acting against the upside potential of Cyprus’s evolving business model.

Executive Board Assessment

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

Cyprus has demonstrated remarkable economic resilience, with growth among the highest in the EA. This strong performance is underpinned by robust service exports and domestic consumption. The labor market remains tight, characterized by a declining unemployment rate and elevated job vacancy levels. While uncertainties persist, there are indications of potential overheating in the economy. This, along with tariff-related trade disruption, will lead growth to moderate this year. While volatile, inflation is projected to stabilize around 2 percent by the end of the year. The current account deficit is estimated to have moderated in 2024, but the external position is assessed to be weaker than the level implied by fundamentals.

The immediate outlook presents downside risks, while longer-term risks appear more balanced. An escalation of trade conflicts—particularly if this broadened to include services trade and FDI—poses an important downside risk. An escalation of regional tensions, and possible new energy price shocks, could affect FDI, tourism, and inflation. Domestically, there are concerns about further overheating, which may arise from a more accommodative fiscal policy. In the medium-to-long term, investment-driven growth will rely on continuous progress in structural reforms. On the upside, Cyprus’s agile and dynamic economy offers substantial potential for growth.

Cyprus’s strong fiscal position has reduced vulnerabilities. In 2024, the primary fiscal surplus reached 5.6 percent, fueled by significant revenue growth that more than compensated for increased public wages and social transfers. As a result, public debt decreased to 65 percent of GDP by the end of 2024, with substantial cash reserves supporting liquidity. This further increased resilience, built policy space for future shocks, and improved investor sentiment.

Fiscal policy should continue to prioritize debt reduction. Given overheating risks, it is crucial to avoid new discretionary measures that would ease fiscal policy and add to inflationary pressures. Instead, efforts should focus on reducing debt well below 60 percent of GDP, thereby ensuring a robust buffer against potential shocks. The authorities’ commitment to maintaining fiscal surpluses through 2028, as specified in the MTFSP under the new EU economic governance framework, supports this goal.

As spending pressures increase, careful management of fiscal space is essential. The financial commitments required for achieving climate and digital transitions will persist beyond the end of EU RRP funding. Additionally, an aging population will necessitate higher expenditures on pensions and healthcare, alongside other long-term expenditures. As a result, the scope for fiscal loosening in the medium term is constrained.

Public spending should emphasize investment while retaining flexibility in response to economic shocks. Capital expenditures should take precedence to enhance potential growth and facilitate the climate transition. At the same time, expanding current spending—such as increasing public wages, broadening subsidies, or introducing untargeted social programs—should be avoided. Specifically, the authorities should resist further increases to the COLA indexation or new ad-hoc salary increases to contain the existing substantial public-private wage gap and prevent additional pressure on real wage growth.

The banking sector boasts substantial capital and liquidity buffers, with financial risks appearing well-contained. Profitability metrics have reached record highs for the second consecutive year, and capitalization levels are now among the highest in Europe. Despite elevated interest rates, asset quality continues to improve, supported by strong economic growth. Nonetheless, ongoing vigilance is essential, particularly concerning the real estate sector.

Recent tightening of the macroprudential policy stance will enhance financial buffers further. The announced increase in the CCyB will bolster resilience by securing already high capital buffers without adversely affecting credit availability or economic growth. In the future, careful calibration of macroprudential policies should continue to strike a balance between financial stability and effective credit intermediation.

Although legacy NPLs continue to decrease, they remain at elevated levels. Most NPLs have been successfully transitioned away from the banking sector and do not pose a significant issue for financial stability. The ongoing resolution of legacy NPLs is expected to accelerate, given the full operationalization of the foreclosure framework and a strong uptake of the mortgage-to-rent scheme. Resolving legacy NPLs is expected to help mobilize domestic capital.

Structural reforms aimed at enhancing judicial efficiency and boosting labor productivity are vital for fostering long-term growth. With employment levels already high, capital deepening will increasingly drive growth. Consequently, policies must create a stable and streamlined business environment conducive to investment. Additional efforts are required in the judicial sector to strengthen the institutional framework for insolvency and creditor rights and to improve court efficiency. Labor policies should focus on addressing skill gaps and mismatches and engaging remaining segments of the labor force, particularly among youth and the long-term unemployed.

Key energy projects and reforms must be expedited to reduce energy costs, enhance energy security, and fulfill climate commitments. Completing the LNG terminal and improving electricity interconnectedness would represent significant progress toward these objectives. Additionally, increasing competition in the electricity market would help lower costs and emissions through market forces. The planned introduction of green taxation would further facilitate the energy transition.

Maintaining a strong AML framework is vital for mitigating reputational risks and business uncertainty. Ongoing efforts to broaden the definition of obliged entities for AML supervision are commendable. Furthermore, the proposed establishment of the National Sanctions Implementation Unit at the Ministry of Finance will enhance clarity for reporting entities regarding compliance with sanctions.

Table 1. Cyprus: Selected Economic Indicators, 2021–2030
	2021	2022	2023	2024	2025	2026	2027	2028	2029	2030
					Projections
Real Economy	(Percent change, unless otherwise indicated)
Real GDP	11.4	7.2	2.8	3.4	2.5	2.7	3.0	3.0	3.0	3.0
Domestic demand	5.6	8.5	5.2	0.7	4.6	3.6	3.6	3.5	3.4	3.2
Consumption	5.7	8.5	4.8	3.3	3.2	2.6	2.8	2.9	2.8	2.8
Private consumption	4.7	9.8	5.9	3.8	2.8	2.9	3.2	3.2	3.2	3.1
Public consumption	8.9	4.7	1.2	1.5	4.4	1.4	1.2	1.7	1.7	1.7
Gross capital formation	5.0	8.5	6.6	-9.5	10.5	7.8	7.0	6.0	5.5	4.5
Foreign balance 1/	5.8	-1.1	-2.3	3.0	-1.9	-0.9	-0.7	-0.5	-0.4	-0.3
Exports of goods and services	27.2	27.1	-2.8	5.3	4.0	4.1	4.0	4.0	4.0	4.0
Imports of goods and services	19.6	29.7	-0.7	2.4	6.1	5.1	4.6	4.5	4.4	4.2
Potential GDP growth	5.5	6.1	4.4	3.3	3.0	2.9	2.9	3.0	3.0	3.0
Output gap (percent of potential GDP)	0.9	2.0	0.4	0.6	0.2	-0.1	0.0	0.0	0.0	0.0
HICP (period average, seasonally-adjusted)	2.3	8.1	3.9	2.3	2.2	2.0	2.0	2.0	2.0	2.0
HICP (end of period, seasonally-adjusted)	4.8	7.6	1.9	3.1	2.0	2.0	2.0	2.0	2.0	2.0
GDP deflator	3.0	6.7	3.8	3.5	4.7	1.6	1.5	1.5	1.5	1.6
Unemployment rate (percent, period average)	7.2	6.3	5.8	4.9	4.8	5.0	5.0	5.0	5.0	5.0
Employment growth (percent, period average)	3.5	5.0	2.8	1.5	0.9	0.8	0.9	0.8	0.8	0.8
Labor force	3.0	4.0	2.3	0.4	0.8	1.0	0.9	0.8	0.8	0.8
Public Finance	(Percent of GDP, unless otherwise indicated)
General government balance	-1.6	2.7	1.7	4.3	3.8	3.5	2.4	2.1	1.9	1.6
Revenue	41.0	40.6	43.7	44.3	44.7	44.3	43.3	43.2	43.2	43.2
Expenditure	42.6	38.0	42.0	40.0	40.9	40.8	40.8	41.1	41.4	41.6
Primary Fiscal Balance	0.1	4.0	3.0	5.6	5.2	4.8	3.8	3.4	3.1	2.9
General government debt	96.5	81.1	73.6	65.1	60.2	54.9	49.7	44.5	41.2	38.3
Balance of Payments
Current account balance	-5.4	-5.4	-9.7	-6.1	-7.1	-7.7	-8.2	-8.7	-9.1	-9.4
Trade Balance (goods and services)	4.7	3.6	1.0	3.6	2.5	1.8	1.1	0.5	0.2	0.0
Exports of goods and services	90.8	105.6	97.2	96.7	95.8	97.4	98.4	99.5	100.5	101.5
Imports of goods and services	86.1	102.0	96.1	93.1	93.2	95.6	97.3	98.9	100.3	101.6
Goods balance	-16.9	-19.7	-23.7	-20.4	-20.4	-21.4	-22.4	-23.3	-24.2	-24.9
Services balance	21.6	23.3	24.7	24.0	22.9	23.2	23.5	23.9	24.4	24.9
Primary income, net	-8.9	-7.9	-9.6	-8.9	-8.6	-8.5	-8.4	-8.3	-8.3	-8.3
Secondary income, net	-1.2	-0.7	-1.1	-0.8	-1.0	-1.0	-1.0	-1.0	-1.0	-1.0
Capital account, net	0.2	0.1	-0.1	0.2	0.2	0.2	0.1	0.1	0.1	0.1
Financial account, net	-7.6	-6.2	-8.7	-5.9	-6.9	-7.5	-8.2	-8.6	-9.1	-9.3
Direct investment	-3.3	-27.2	-21.0	-18.0	-18.0	-18.1	-18.3	-18.3	-18.5	-18.6
Portfolio investment	3.9	3.9	11.0	4.9	5.8	3.6	4.2	3.5	1.5	2.6
Other investment and financial derivatives	-9.6	16.8	1.2	7.2	5.3	7.0	5.9	6.2	7.9	6.7
Reserves ( + accumulation)	1.4	0.3	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Program financing 2/	0.0	0.0	0.0	0.0	-1.0	-2.7	-2.5	-2.4	-2.4	-2.0
Errors and omissions	-2.5	-0.9	1.1	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Saving-Investment Balance
National saving	13.8	14.9	11.8	14.4	13.7	13.6	13.4	13.3	13.2	13.1
Government	1.8	5.8	6.7	7.9	7.8	7.3	6.3	6.1	6.1	5.8
Non-government	12.0	9.0	5.1	6.5	5.9	6.3	7.1	7.2	7.1	7.3
Gross capital formation	19.2	20.3	21.4	20.5	20.8	21.3	21.7	22.1	22.4	22.5
Government	3.5	3.2	5.0	3.6	3.9	3.8	3.9	4.1	4.2	4.2
Private	15.8	17.1	16.4	16.9	16.9	17.4	17.7	18.0	18.1	18.2
Foreign saving	-5.4	-5.4	-9.7	-6.1	-7.1	-7.7	-8.2	-8.7	-9.1	-9.4
Memorandum Item:
Nominal GDP (billions of euros)	25.7	29.4	31.3	33.6	36.0	37.6	39.3	41.1	42.9	44.9
Structural primary balance	-0.4	3.3	2.6	5.3	5.2	4.8	3.8	3.4	3.1	2.9
External debt	994.1	879.7	828.3	767.6	706.8	669.0	631.4	595.8	564.1	534.0
Net IIP	-105.7	-95.2	-92.7	-98.5	-99.3	-102.6	-106.9	-111.7	-114.6	-118.8
Sources: Cystat, Eurostat, Central Bank of Cyprus, and IMF staff estimates.
1/ Contribution to real GDP growth
2/  Program financing (+ purchases, – repurchases) is included under the Financial Account, with consistent sign conversion

[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. 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.

[2] Under the IMF’s Articles of Agreement, publication of documents that pertain to member countries is voluntary and requires the member consent. The staff report will be shortly published on the www.imf.org/cyprus page.

https://www.imf.org/en/News/Articles/2025/06/02/pr-25171-cyprus-imf-concludes-2025-art-iv-consultation

MIL OSI

Source: IMF – News in Russian

June 2, 2025

Dubrovnik: The two-day international conference “Growth and Resilience of Central, Eastern and Southeastern European Countries in a Fragmented World”, organized jointly by the Croatian National Bank (CNB) and the International Monetary Fund (IMF) ended on May 30 in Dubrovnik. This is the fourth time the CNB and the IMF have teamed up to co-host such a conference.

The conference was attended by leading representatives of international institutions, central banks, governments, academia and the business sector. It provided an opportunity to discuss challenges and opportunities for Central, Eastern and Southeastern European (CESEE) countries in the context of global economic and political fragmentation, the need to strengthen the resilience of macroeconomic policies, the role of CESEE countries in the European single market and structural reform priorities.

The key speakers and panelists at the conference were Kristalina Georgieva, Managing Director of the International Monetary Fund, Boris Vujčić, Governor of the Croatian National Bank, and Valdis Dombrovskis, Commissioner of the European Commission.

Kristalina Georgieva stated: “Faced with structural headwinds and a more volatile external environment, domestic reforms present a unique opportunity to unlock the region’s full potential and foster strength and resilience. Through the IMF’s surveillance and technical assistance, we are committed to supporting the CESEE region to unlock its growth potential. By acting decisively, we can transform the current challenges into opportunities and forge a brighter future for the region”.

Governor Vujčić noted: “The reshaping of global value chains and re-industrialization in Europe will not happen evenly. The CESEE region must actively define its role — within the EU and beyond — to ensure it is not sidelined in these processes. It means accelerating digital transformation, advancing institutional reforms, and investing in the skills and capabilities needed to compete in high-value sectors. It also means strengthening the region’s ability to withstand shocks: from diversifying energy sources and modernizing infrastructure to building strategic reserves and ensuring robust public institutions.”

During two days of the conference, expert panels and roundtables were held to discuss the importance of continuing reforms, strengthening fiscal space, adapting to the new global realities and investing in innovation and education as key prerequisites for sustainable growth and resilience of the region.

At the end of the conference, in his concluding remarks, CNB Governor highlighted the need for joint action and exchange of experience in order for CESEE countries to successfully respond to the challenges of an increasingly fragmented global environment.

https://www.imf.org/en/News/Articles/2025/06/02/pr-25170-international-conference-central-e-and-se-eur-countries-held-in-dubrovnik

MIL OSI

Source: IMF – News in Russian

Statement by IMF MD Kristalina Georgieva on the Passing of Former IMF FDMD Stanley Fischer

June 1, 2025

Washington, DC: Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), issued the following statement today after news of the death of Mr. Stanley Fischer, former IMF First Deputy Managing Director:

“We are deeply saddened to learn of the passing of our dear friend Stan Fischer, who among many career achievements, served as the First Deputy Managing Director of the IMF between 1994 and 2001. Stan will be remembered for his enormous influence on the economics profession, first as a leading academic and teacher, then as an accomplished policymaker across many prominent posts. During his time at the IMF, he helped lead the Fund’s response to a number of significant challenges, including the Mexican crisis of 1994 and the 1997 Asian financial crisis. To this day, Stan is deeply admired by Fund staff, management and the membership for his intellectual leadership, personal integrity, and dedication to public service. He believed strongly in the Fund’s core mission, as he put it: ‘to promote principles of good economic citizenship, and provide a forum for countries to discuss issues of mutual interest.’

“As an academic at the University of Chicago and MIT, Stan’s research had a profound effect on the field of macroeconomics, becoming a leading figure in the New Keynesian movement. Stan taught, mentored and influenced many leading policymakers and thought leaders. During his extraordinary policymaking career, he served as Chief Economist of the World Bank before becoming First Deputy Managing Director of the IMF. From 2005 until 2013, he served as Governor of the Bank of Israel, helping to steer the Israeli economy through the global financial crisis. He then became Vice-Chair of the Board of Governors of the Federal Reserve System in 2014, serving in that role until 2017. As a central banker, he was a staunch proponent of inflation targeting frameworks, transparency, and central bank independence.

“On behalf of the IMF, I extend my deepest condolences to Mr. Fischer’s three children Michael, David and Jonathan and their families. Stan led a life of exemplary public service, matched only by his innate goodness as a colleague, friend and human being.”

https://www.imf.org/en/News/Articles/2025/06/01/pr-25169-statement-by-imf-md-kristalina-georgieva-on-the-passing-of-former-imf-fdmd-stanley-fischer

MIL OSI

Source: IMF – News in Russian

May 30, 2025

Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed the Article IV consultation[1] for Bolivia on May 2. The authorities have consented to the publication of the Staff Report prepared for this consultation.[2]

Bolivia’s real GDP growth has moderated to 2.1 percent in the first three quarters of 2024, driven by a decline in hydrocarbons production, a slowdown in services activity, and a drop in soy crops and related manufacturing due to ‘El Niño’ effects. The economy has also faced disruptions from road blockages and scarcity of foreign exchange (FX)―given critically low international reserves―fuels and other critical inputs. High import costs, weak agricultural production, and road blockages pushed inflation to 10 percent at end-2024, the highest level in over a decade. Unemployment has fallen, but underemployment is rising, and real incomes retrenched on average. The combination of FX shortages, slowing activity, and depreciation of the parallel exchange rate resulted in a compression of the current account deficit to 2.7 percent for 2024. The fiscal deficit surpassed 10 percent of GDP in 2023-24 with declining hydrocarbon revenues, tax exemptions, increased social spending, and higher interest payments. The deficit has been mostly financed by the central bank amid tight external financing constraints. Public debt has increased to 95 percent of GDP.

The financial sector remains well buffered. However, deposits declined in real terms and net interest margins are pressured by interest rate controls, limiting banks’ ability to raise loan rates amid rising inflation and slowing credit growth. Banks have experienced improved profitability from FX trading gains, resulting in a strengthened capital adequacy ratio of 13.5 percent in 2024, while non-performing loans have remained low at 3.2 percent of total loans.

 

Executive Board Assessment[3]

Executive Directors agreed with the thrust of the staff appraisal. They expressed concern over Bolivia’s acute fiscal and external imbalances and unsustainable policy mix and called for urgent actions to address the overvalued exchange rate, bolster foreign reserves, and implement sustained fiscal consolidation. Directors cautioned that inaction could lead to a painful disorderly adjustment and underscored the Fund’s readiness to support the authorities through its various activities. They encouraged the staff to continue to closely engage the authorities on the needed adjustments. Careful communication of the policy reforms to stakeholders would be pivotal to enhance their acceptability.

Directors stressed that the untenable peg to the U.S. dollar and depleted international reserves call for a decisive shift in the monetary policy framework. They called for a realignment of the exchange rate with market fundamentals, moving toward greater exchange rate flexibility, and for front loaded fiscal consolidation and restrictive monetary policy settings, which would address inflationary pressures, alleviate FX shortages, and allow elimination of FX restrictions. Increasing interest rate flexibility will facilitate effective monetary policy transmission.

Directors recommended a credible and sustained fiscal consolidation by rationalizing the public wage bill, phasing out fuel subsidies, enhancing public investment management and spending efficiency, and mobilizing tax revenue. Eliminating monetary financing of fiscal deficits is also important. Directors also emphasized the need to mitigate the effects of the policy adjustments on vulnerable populations, including through improved targeting of the social safety net. A coherent fiscal framework can help underpin the consolidation plan.

Directors emphasized the need to strengthen financial sector supervision amid growing economic vulnerabilities. They called for close monitoring and contingency planning and encouraged the implementation of the remaining 2024 FSAP recommendations and strengthening the AML/CFT framework. Enhancing Bolivia’s public pension fund operations by diversifying investments and strengthening the pension supervisor’s independence is also important.

Directors called for comprehensive supply side reforms to enhance productivity and growth potential and facilitate external rebalancing by phasing out export ceilings, price controls, and credit quotas. They emphasized the need for a clear regulatory framework to attract private investment and to focus public investment on socially beneficial infrastructure projects. Further efforts to enhance transparency and the governance and anticorruption frameworks will also be important. Improving data adequacy also remains a priority.

It is expected that the next Article IV consultation with Bolivia will be held on the standard 12 month cycle.

Table 1. Bolivia: Selected Economic Indicators, 2023-30

Population (millions, 2024) 11.3 Poverty rate (percent, 2023) 36.5 Population growth rate (percent, 2024) 1.4 Adult literacy rate (percent, 2023) 95.2 Life expectancy at birth (years, 2024) 68.7 GDP per capita (US$, 2023) 3,736 Total unemployment rate (2024Q3) 3.6   IMF Quota (SDR, millions) 240.1     Est. Proj.     2023 2024 2025 2026 Income and prices Real GDP 3.1 1.3 1.1 0.9 Nominal GDP 2.6 6.5 16.4 16.9 CPI inflation (period average) 2.6 5.1 15.1 15.8 CPI inflation (end of period) 2.1 10.0 15.6 16.8 Combined public sector Revenues and grants 27.8 28.4 24.8 24.2    Of which: Hydrocarbon related revenue 1/ 2.8 2.2 1.9 1.6 Expenditure 38.7 38.7 37.5 37.4    Current 32.3 33.2 32.5 32.6    Capital 2/ 6.4 5.4 5.0 4.8 Net lending/borrowing (overall balance) -10.9 -10.3 -12.7 -13.2    Of which: Non-hydrocarbon balance -15.4 -16.4 -16.3 -16.0 Total gross NFPS debt 3/ 90.8 95.0 90.4 91.4 External sector Current account -2.5 -2.7 -2.6 -3.2 Exports of goods and services 26.2 20.7 18.0 16.0    Of which: Natural gas 4.5 3.3 2.3 1.8 Imports of goods and services 28.6 23.4 20.4 18.9 Capital account 0.0 0.0 0.0 0.0 Financial account (-= net inflow) -2.0 -3.5 -2.8 -3.3    Of which: Direct investment net 0.0 -0.2 -0.2 -0.1    Of which: Other investment, net -1.5 -2.1 -2.3 -3.4    Of which: Unidentified financing inflows 0.0 0.0 -1.4 -3.2    Of which: Unidentified financing inflows 0.0 0.0 1.9 2.8 Net errors and omissions -4.8 -2.6 0.0 0.0 Terms of trade index (percent change) 1.2 -2.3 -1.6 -0.2 Central Bank gross foreign reserves 4/ 5/ 6/ In millions of U.S. dollars 1,808 2,009 2,118 2,199 In months of imports of goods and services 1.9 2.1 2.0 2.0 In percent of GDP 4.0 4.1 3.8 3.3 In percent of ARA 20.6 23.0 22.3 20.5 Money and credit Credit to the private sector (percent change) -2.1 4.0 7.5 7.2 Credit to the private sector (percent of GDP) 70.8 69.2 63.9 58.6 Broad money (percent of GDP) 90.2 87.5 85.7 86.9 Memorandum items: Nominal GDP (in billions of U.S. dollars) 45.5 48.4 56.3 65.9 Bolivianos/U.S. dollar (end-of-period)  7/ 6.9 … … … REER, period average (percent change) 8/ -1.5 … … …   Oil prices (in U.S. dollars per barrel) 80.6 79.2 72.0 68.2   Energy-related subsidies to SOEs (percent of GDP) 9/ 3.9 4.0 3.4 2.9 Sources: Bolivian authorities (MEFP, Ministry of Planning, BCB, INE, UDAPE); IMF; Fund staff calculations. 1/ Excludes YPFB profits/losses. 2/ Includes net lending. 3/ Public debt includes SOE’s borrowing from the BCB (but not from other domestic institutions) and BCB loans to FINPRO and FNDR. 4/ Excludes reserves from the Latin American Reserve Fund (FLAR) and Offshore Liquidity Requirements (RAL). 5/ All foreign assets valued at market prices. 6/ Includes a repurchase line of US$99.2 million maturing in 2025. 7/ Official (buy) exchange rate. 8/ The REER based on authorities’ methodology is different from that of the IMF (see 2017 and 2018 Staff Reports). 9/ Includes the cost of subsidy borne by public enterprises and incentives for hydrocarbon exploration investments in the projection period.

[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] Under the IMF’s Articles of Agreement, publication of documents that pertain to member countries is voluntary and requires the member consent. The staff report will be shortly published on the www.imf.org/Bolivia page.

[3] At the conclusion of the discussion, the Managing Director, as Chair of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country’s authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.

https://www.imf.org/en/News/Articles/2025/05/30/pr-25168-bolivia-imf-concludes-2025-art-iv-consult

MIL OSI

Source: IMF – News in Russian

May 30, 2025

• IMF staff and the Ethiopian authorities have reached staff-level agreement on economic policies to conclude the third review of the four-year US$3.4 billion Extended Credit Facility arrangement. Once approved by the IMF Executive Board, Ethiopia will gain access to about US$260 million in financing.
• Ethiopia’s macroeconomic performance has exceeded program expectations, with better-than-forecast results for inflation, export growth, and international reserves.
• Maintaining reform momentum remains essential for consolidating recent gains, correcting macroeconomics imbalances, restoring external debt sustainability, laying the foundations for high, private sector-led growth, and ensuring the success of Ethiopia’s homegrown reform agenda.

Washington, DC: A staff team from the International Monetary Fund (IMF) led by Mr. Alvaro Piris, visited Addis Ababa from April 3 to 17, 2025, to discuss the 2025 Article IV consultation and the third review under the Extended Credit Facility (ECF). Discussions continued at the Spring Meetings in Washington DC, April 21-28, and subsequently. The ECF arrangement was approved by the IMF Executive Board on July 29, 2024, for a total amount of US$3.4 billion (SDR 2.556 billion). Subject to approval by the IMF Executive Board, the third review will make available about US$260 million (SDR191.7 million), bringing total IMF financial support under the ECF arrangement so far to about US$1,849 million (SDR1,406.4 million).

Today, Mr Piris issued the following statement:

“The IMF staff team and the Ethiopian authorities have reached staff-level agreement on the third review of Ethiopia’s economic program under the ECF arrangement. The agreement is subject to the approval of IMF management and the Executive Board in the coming weeks. A memorandum of understanding with official creditors is expected to be agreed ahead of the IMF Board’s consideration of the third review.

“The authorities’ policy actions in the first year of the program have yielded strong results. The transition to a flexible exchange rate regime has proceeded with little disruption. Measures to modernize monetary policy, mobilize domestic revenues, enhance social safety nets, strengthen state-owned enterprises, and anchor financial stability continue to show encouraging results. Macroeconomic indicators have performed better than expected, with substantially better outcomes than forecast for inflation, goods exports, and international reserves.

“Recent policy action should help deepen the FX market and tackle remaining distortions. While real exchange misalignment has been corrected and FX availability has improved from a year ago, the spread between the official and parallel market widened again in early 2025 and high fees and commissions persist. Actions that are being rolled out to enhance transparency, reduce costs, ease restrictions on current account transactions, and strengthen prudential regulation will help to improve the functioning of the FX market.

“Maintaining reform momentum will be key to consolidating gains and securing sustainable high growth. Continued tight monetary and financial conditions will be important for managing inflation and exchange rate expectations. Further revenue mobilization is needed to provide sustainable financing for critical development spending. Reforms to improve the business environment, ensure fair taxation practices, encourage foreign direct investment, and facilitate open dialogue with business will be important to secure private sector investment. Efforts to end the remaining elements of financial repression and develop the capital market will help to mobilize savings and support the efficient allocation of capital.

“The staff team is grateful to the authorities for the excellent policy discussions and their strong commitment to the success of the IMF-supported economic program. The team met with Minister of Finance Ahmed Shide, Governor of the National Bank of Ethiopia Mamo Mihretu, State Minister of Finance Eyob Tekalign, and other senior officials. Staff also had productive discussions with representatives of banks and businesses that are operating in a range of sectors and representatives of civil society.”

https://www.imf.org/en/News/Articles/2025/05/30/pr-25167-ethiopia-imf-staff-conclude-art-iv-discuss-and-reach-agreement-on-3rd-rev-of-ecf

MIL OSI

Source: IMF – News in Russian

Opening Remarks by Kristalina Georgieva, IMF Managing Director, at the CESEE High-Level Conference in Dubrovnik, Croatia

May 30, 2025

Good morning and a very warm welcome to everyone!

I would like to begin by thanking Governor Vujčič for the kind invitation. Dear Boris: it is such a pleasure to return to Dubrovnik. Truly, a pearl of the Adriatic!

Since its first gathering here in 2017, this conference has become an important forum for policymakers to discuss the challenges confronting the region.

And, as usual, we have much to discuss: the successes, the unfinished business and, now, huge new challenges.

***

First, a few words on the successes.

Over the last three decades, reforms promoting economic openness and integration—first with the EU, then within the EU—have helped the countries of Central, Eastern and Southeastern Europe achieve a remarkable convergence with the standards of living of their more advanced peers.

Since the mid-1990s, incomes have more than doubled and the gap relative to the advanced Europe has shrunk sharply.

Manufacturing became a catalyst for productivity growth as integration into European and global value chains helped CESEE economies reach beyond their domestic markets.

At the same time, openness to FDI accelerated capital accumulation and technology transfer.

EU accession played a huge role. Powered by the domestic structural reforms put in place on the path to EU accession countries that joined the EU   accelerated their income convergence with the advanced Europe and outperformed comparable countries outside of the block.

Thus, it is fair to pause and say: well done.

***

Second, the unfinished business.

The journey is far from complete. Reforms slowed after EU accession. After the Global Financial Crisis, investment fell significantly and contributed to a productivity slump that has only worsened since Covid.

Various economic challenges were already calling out for revitalizing reforms. The demand for skilled workers is rising, but labor supply is tightening. High energy costs are hurting manufacturing competitiveness. New technologies in the auto sector—and AI—could alter export value chains.

So even before the latest global economic developments, there certainly was much more work to do.

***

And now, there are huge new challenges.

The sweeping disruptions to world trade that are underway are plain for all to see. World trade is being tested. And while most of the CESEE countries are less impacted directly, let us be very clear: the indirect impact is significant as these disruptions pose a major threat to the region’s main trading partners and to the overall economic model of openness that CESEE countries rely on.

Trade tensions and uncertainty complicate domestic and foreign investment plans. This is particularly painful for a region that needs access to modern production processes, jobs in high-productivity sectors, and export demand.

***

So here is my main message to you today: standing still, taking shelter, and hoping the storm will pass is not a plan. It would be much wiser to assume that many of the shifts we see are here to stay, and to act accordingly.

So, what should CESEE countries do in order to negotiate this stormy economic weather? How can they catch a tailwind from the “Adriatic Bora” and keep powering forward?

I would point to three critical priorities:

• Steering a steady course in terms of macroeconomic policy—monetary and fiscal policies for stability;
• Getting the ship into better working order so it can sail forward faster—that is, pursue structural policies for growth; and
• Integrating more deeply into and within the single market of the EU—strength through regional cohesion.

Let me briefly discuss each of these, in turn.

Priority one: action to mitigate uncertainty. The best antidote to uncertainty is a stable macroeconomic environment.

• Central banks must remain agile and focused on achieving their targets. Where inflation is still high and persistent, policymakers should tread cautiously. Clear communication is key. Independence lends credibility and must be protected.
• Fiscal policy must focus on ensuring sustainability and policy space. Countries with low deficits and debts can use fiscal space to invest in essential areas such as energy security. But in countries where fiscal space is limited, governments need to either reallocate spending or boost fiscal revenues.

Priority two: take decisive action to boost growth potential. In a new study, we find that domestic reforms across the CESEE region could lift GDP levels by 7 percent over the medium term. The potential goes up to 9 percent for the Western Balkans.

• Further productivity gains from better education, more efficient labor markets that allow talent to thrive, and cutting red tape are waiting to be tapped. In the Western Balkans and aspiring EU entrants, closing governance gaps with the EU frontier delivers the highest dividend. The case to act decisively is compelling.

Priority three—last but certainly not least: CESEE countries must ensure they retain the benefits of their economic integration with Europe and the global economy.

• Integration has been a major source of knowledge transfer and capital deepening, particularly through FDI. As is the case across the EU as a whole, the CESEE region would benefit from further progress in completing the EU’s single market.
• Our analysis shows that internal barriers add significant costs — for goods they are equal to 44 percent tariffs, and for services to a staggering 110 percent! Completing the single market can be a major factor in strengthening the performance of the EU economy and improving its attractiveness for investment.
• In a forthcoming working paper on Europe’s reform priorities, we outline several concrete steps: a more integrated electricity market; more capital for startups; better labor mobility across borders; and simpler regulations. Together, these measures could raise EU GDP by about 3 percent over the next ten years.
• In addition, we argue that the EU budget can lend more of a hand. Tying EU funds for public investment to progress on reform implementation would provide a double blessing: more central fiscal funding, and more effective use of it.

***

With that, let me conclude.

We at the IMF stand ready to support you, as we always have. Through our surveillance and technical assistance, we are committed to supporting the CESEE region unlock its growth potential. The steadily increasing demand we see for IMF capacity development, including in public investment management and central banking, testifies to our role as your partner in your quest for faster growth and stronger resilience.

The region is at a crossroads. Faced with structural headwinds and a much more volatile external environment, reinvigorating domestic reforms are now essential—to navigate the stormy seas and to unlock the region’s potential to sail faster.

The time to act is now. By moving decisively, you can transform the current challenges into opportunities and chart a brighter future for the region.

Thank you.

https://www.imf.org/en/News/Articles/2025/05/29/sp053025-growth-and-resilience-in-central-eastern-and-southeastern-europe-in-a-more-fragmented-world

MIL OSI