Category: IMF – Russia

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

Source: IMF – News in Russian

May 29, 2025

Press releases include statements of IMF staff teams that convey preliminary findings after meetings with the authorities of 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 conclusions of the meetings, staff will prepare a report that, subject to management approval, will be presented to the IMF’s Executive Board for discussion and decision.

• IMF Staff and the Togolese authorities have reached staff-level agreement on economic policies and reforms to conclude the second review of the Extended Credit Facility (ECF)-supported program. Once the review is completed by the IMF Executive Board, Togo will have access to SDR 44.0 million (about US$58.4 million) in financing.
• The IMF-supported program is broadly on track, with robust growth and moderating inflation. All quantitative targets and all structural benchmarks at end-December 2024 met, except for the quantitative performance criterion on the fiscal balance.
• The authorities have reaffirmed their commitment to implementing sound policies, including by raising fiscal revenue, containing debt accumulation, and making growth more inclusive, as well as enacting structural reforms to enhance public financial management, strengthen the financial sector, and enhance governance.

Washington, DC: An International Monetary Fund (IMF) staff team, led by Hans Weisfeld held meetings with the Togolese authorities in Lomé and Washington in recent months to discuss progress under the authorities’ economic program supported by an IMF Extended Credit Facility (ECF) arrangement.

At the conclusion of the discussions, Mr. Weisfeld issued the following statement:

“The mission has had constructive and productive discussions with the Togolese authorities and commended them on the sustained progress in advancing reforms. A staff-level agreement was reached on all policies, including key parameters of the 2025 fiscal framework and reform measures going forward, in line with the program‘s objectives.

“Economic growth reached an estimated 5.3 percent in 2024 and is projected at 5.2 percent in 2025 and around 5.5 percent per year thereafter, barring major adverse shocks. Inflation has continued to slow, reaching 2.6 percent in April 2025 (annual average). 

“The IMF-supported government economic policy program is broadly on track. The authorities met all quantitative performance criteria for end-2024 except the criterion on the fiscal balance. Tax revenue in 2024 increased as planned, while non-tax revenue even exceeded expectations. At the same time, financing support provided to local communities affected by floods and the purchase of a large stock of fertilizers that are being made available to farmers at subsidized prices meant that government debt rose more quickly than planned, slowing progress toward stronger debt sustainability. To help the public understand budget execution and the drivers of debt, the authorities have published an explanation of fiscal developments in 2024. This is a very welcome step.

“At the same time, the authorities made good progress on structural reforms. They met both outstanding structural benchmarks set for end-2024 by (i) strengthening the budgetary risk analysis report accompanying the draft annual budgets; and (ii) injecting substantial funds into the remaining public bank to bring its regulatory capital in line with the requirements set by the regional banking regulator. The authorities also aim to continue to enhance governance. They (i) are working on strengthening the public procurement legal framework to require the publication of the names of beneficial owners of companies awarded procurement contracts; and (ii) have invited an IMF Governance Diagnostic Assessment and committed to publishing its findings.

“It will be very important to make good progress on the planned growth-friendly and socially responsible fiscal consolidation to reinforce debt sustainability while continuing reforms to enhance public financial management, strengthen the financial sector, and enhance governance.

“The IMF approved the ECF arrangement in March 2024 to help the authorities address the legacies of shocks seen since 2020, notably the COVID pandemic and the increase in global food and fuel prices. The Togolese authorities were able to lessen the impacts of these shocks on the Togolese economy and population, but this came at the price of large fiscal deficits and a rapidly rising debt burden. The IMF-supported government program aims to (i) make growth more inclusive while strengthening debt sustainability, and (ii) conduct structural reforms to support growth and limit fiscal and financial sector risks. The IMF provides financing of SDR 293.60 million (about US$ 390 million) on favorable terms to Togo through the ECF arrangement. The IMF Executive Board completed the First Review of the program in December 2024.   

The staff team looks forward to continuing the fruitful dialogue with the Togolese authorities and stakeholders in the period ahead, including in the context of the mission for the Third Review in the second half of 2025.”

https://www.imf.org/en/News/Articles/2025/05/29/pr-25166-togo-imf-reaches-agreement-on-the-2nd-rev-of-ecf-with-togo

MIL OSI

Source: IMF – News in Russian

May 29, 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. This mission will not result in a Board discussion.

• International Monetary Fund (IMF) staff and the Ukrainian authorities have reached staff level agreement (SLA) on the Eighth Review of the 4-year, $15.5 billion Extended Fund Facility (EFF) Arrangement. Subject to approval by the IMF Executive Board, Ukraine would have access to about US$0.5 billion (SDR 0.37 billion), bringing total disbursements under the program to US$10.65 billion.
• All end-March quantitative performance criteria (QPCs) and indicative targets (IT) have been met and understandings were reached on a set of policies and reforms to sustain macroeconomic stability. The structural reform agenda continues to make progress with two structural benchmarks met, another to be completed in the coming weeks, and strong commitments to advance other key reforms.
• The outlook remains exceptionally uncertain as the war continues to take a heavy toll on the population, economy, and infrastructure. Despite the challenging environment, the program remains on track and fully financed on the back of large-scale external commitments.

Kyiv, Ukraine: An International Monetary Fund (IMF) team led by Mr. Gavin Gray held discussions with the Ukrainian authorities in Kyiv, Ukraine during May 20-27 on the Eighth Review of the country’s 4-year Extended Fund Facility (EFF) Arrangement. Upon the conclusion of the discussions, Mr. Gray issued the following statement: 

“IMF staff and the Ukrainian authorities have reached staff-level agreement on the Eighth Review of the EFF, subject to approval by the IMF Executive Board, with Board consideration expected in coming weeks. 

“Ukraine’s four-year EFF Arrangement with the IMF continues to provide a strong anchor for the authorities’ economic program in times of exceptionally high uncertainty. All quantitative performance criteria and indicative targets for end-March have been met, and progress continues on the structural agenda due for this review.

“The economy remains resilient despite the challenges arising from more than three years of war. As Russia’s war in Ukraine continues, real GDP growth is expected to remain modest, at 2-3 percent for 2025, reflecting headwinds from labor constraints and damage to energy infrastructure. Inflation has continued to rise, reaching 15.1 percent y/y in April mainly due to rising food and labor costs; inflation expectations remain anchored. The National Bank of Ukraine (NBU) has raised the policy rate by a cumulative 250 bps since December in response. Gross international reserves reached US$46.7 billion as of end-April, reflecting continued large external official support. Risks remain exceptionally high given uncertainty on the war and the prospects for peace and recovery.  

“The 2025 fiscal deficit is large as the level of critical expenditures remains elevated as the war continues. Financing the deficit requires significant external support, notably from the G7’s ERA Initiative, whose full disbursement during the program period is critical to support macroeconomic stability and ensure the program remains financed. Risks of additional critical expenditure requirements in 2025 are high and thus the authorities need to prepare offsetting measures should expenditure shocks materialize. Beyond 2025, expenditures are expected to remain high for the foreseeable future. Consequently, it is imperative and unavoidable that the authorities sustain efforts to mobilize domestic revenues over the medium-term since external support alone will not be sufficient to finance the deficit, restore fiscal sustainability, support critical spending, and finance reconstruction.

“Determined efforts are required to mobilize domestic revenues, tackle tax evasion and avoidance, and improve the investment climate. Broad-based, durable, and efficient revenue measures and robust implementation of Ukraine’s National Revenue Strategy (NRS) is essential. Tax policy reforms need to be coupled with improvements in tax administration and continued reforms to the state customs service (SCS) and state tax service (STS). Restoring debt sustainability hinges on this revenue-based fiscal adjustment and continued implementation of the authorities’ debt restructuring strategy, including a treatment of the GDP warrants. The upcoming 2026-2028 budget declaration is an important step to set out the strategic objectives of the authorities’ medium-term fiscal framework and policies. 

“With rising inflation, the increases by the National Bank of Ukraine’s (NBU) to their key policy rate (KPR) have been appropriate. Additional action may be warranted if inflation accelerates further or inflation expectations deteriorate. The monetary stance should remain tight to help reduce inflation and bring it to the NBU’s target over its three-year policy horizon. The exchange rate should play a greater role as a shock absorber, as per the preconditions outlined in the relevant NBU Strategy; this will help prevent external imbalances and preserve adequate reserves, particularly given heightened risks to the outlook. The judicious and staged approach to FX liberalization should continue, consistent with overall monetary and FX policy mix to maintain adequate reserves, and measures should continue to be closely monitored.

“Governance reforms remain essential to bolster the rule of law and increase the independence, competence, and credibility of anti-corruption and judicial institutions. Reforming the state customs service (SCS) is essential to tackle corruption and reduce tax evasion. Progress in this area requires finalizing a comprehensive reform plan—a requirement for the completion of the review—coupled with the swift appointment of a permanent head of the SCS. The recently published NABU external audit, a structural benchmark, provides an opportunity to implement additional reforms to strengthen the institution and increase public trust. Similarly, the government’s commitment to amend the criminal procedure code, also a structural benchmark, is a signal of their willingness to strengthen the anti-corruption system and meet international obligations. On SOE corporate governance, the selection of new CEOs for GTSO and Ukrenergo should proceed promptly based on a merit-based process.     

“Effective public investment management (PIM) is critical for post-war recovery, reconstruction, and growth against a backdrop of limited fiscal space. To tackle these challenges, the government of Ukraine has made important progress in strengthening PIM frameworks, and we encourage the authorities to build on this success. A strategic, holistic, and transparent approach is essential to overcome absorption capacity constraints and allocate scarce resources efficiently. 

“The financial sector remains stable, but continued vigilance is warranted given elevated risks. Swift action to address critical institutional challenges of the NSSMC is a priority to enhance its effectiveness, and fit and proper tests need to proceed without further delay. Developing financial markets infrastructure and associated reforms will be indispensable to attracting private sector and foreign capital to support reconstruction and recovery. Comprehensive consultation with financial market participants is essential to facilitate a prioritized reform agenda.  

“The mission met with Prime Minister Shmyhal, Finance Minister Marchenko, National Bank of Ukraine Governor Pyshnyy, other government ministers, public officials, and civil society. The mission thanks them and their technical staff for the excellent collaboration and constructive discussions.” 

https://www.imf.org/en/News/Articles/2025/05/29/pr-25165-ukraine-imf-and-ukr-authorities-reach-agreement-on-8th-rev-of-eff-arrang

MIL OSI

Source: IMF – News in Russian

May 29, 2025

Washington, DC: An International Monetary Fund (IMF) mission, led by Lone Christiansen and comprising Thomas Elkjaer, Gee Hee Hong, Yueling Huang, Alain Kabundi, and Sylwia Nowak, conducted discussions for the 2025 Article IV Consultation with Italy during May 14–28. At the end of the visit, the mission issued the following statement:

• Outlook: The growth outlook remains highly uncertain amid ongoing global trade tensions. Persistently low productivity growth and demographic headwinds weigh on longer-term economic prospects.
• Fiscal policy: A better-than-expected fiscal outturn in 2024 enabled a return to a primary surplus. Continuing the strong performance will be essential to place public debt on a downward trajectory.
• Financial sector policy: The banking sector remains well-capitalized and liquid. Continuing to monitor asset quality and macro-financial linkages between the sovereign and financial institutions remains important to safeguard financial stability.
• Structural policies: Medium-term challenges that are weighing on growth have become today’s pressing issues. A swift and effective implementation of the National Recovery and Resilience Plan will be key to support higher, lasting growth and should be complemented by a successor reform program to amplify the gains.

 

Recent economic developments, outlook, and risks

The Italian economy has continued to expand at a moderate pace. For the second consecutive year, economic activity grew by 0.7 percent in 2024, supported in part by infrastructure investment under the National Recovery and Resilience Plan (NRRP) and a positive contribution from net exports. The current account strengthened to a surplus of above 1 percent of GDP. Despite heightened global trade policy uncertainty, economic activity held up well in the first quarter of 2025, with real GDP growing by 0.3 percent quarter-on-quarter and employment reaching a record high. Credit to households has turned positive, and the contraction in credit to corporates has eased. Headline inflation gradually strengthened, reaching 2 percent in April. Nonetheless, the female labor force participation rate remains well below the EU average, productivity growth is weak, and regional disparities endure, with labor inactivity rates significantly higher in the South than in the North.

Heightened uncertainty has dampened the near-term economic outlook, while subdued productivity growth and rapid population aging are expected to continue weighing on growth prospects. Timely and effective implementation of NRRP projects is expected to support near-term economic activity, while trade tensions are likely to provide a notable drag. Consequently, the April 2025 World Economic Outlook (WEO) projected growth to moderate to 0.4 percent in 2025 before temporarily picking up to 0.8 percent next year, amid the peak in NRRP-related investments and positive trade spillovers from higher investment in Germany. Headline inflation is expected to average 1.7 percent this year, on lower energy prices and moderate wage growth, before converging to the ECB’s 2 percent target in 2026. Over the medium term, weak productivity growth and adverse demographics are projected to continue weighing on the outlook, keeping growth at around 0.7 percent.

The outlook is subject to substantial uncertainty and risks. On the upside, the stronger-than-expected preliminary outturn for the first quarter presents mild upside risks to the April 2025 WEO forecast. A faster-than-expected acceleration in global growth, stronger productivity gains from public investments and reforms, and deeper EU integration could further support investment, exports, and productivity. However, downside risks remain significant, including from escalating trade tensions, an intensification of regional conflicts, and a further tightening of global financial conditions. Climate-related shocks, including extreme weather events, could also dampen growth and further constrain fiscal space. As digitalization advances, cyberthreats could become more pervasive and disruptive, particularly for the financial system. Delayed or inefficient NRRP implementation could undermine growth.

Fiscal policy: Leaning into continued strong performance

Maintaining strong fiscal discipline along with growth-enhancing reforms is critical to reduce the public debt ratio and will help reinforce resilience. A better-than-expected fiscal outturn in 2024, owing to continued improvements in tax compliance and a strong labor market, is welcome. Overall, the headline deficit was halved, the primary balance turned to a surplus, and the authorities envision further gradual deficit reduction. Staff recommends continuing the strong performance and reaching a primary surplus of 3 percent of GDP by 2027 to decisively reduce the debt ratio and help contain related vulnerabilities. Achieving this goal would require additional near-term efforts compared to what is already built into the authorities’ fiscal plans. However, the recommended cumulative adjustment path would entail a smaller effort over the medium term than a more gradual one in view of the projected worsening in the interest rate-growth differential and of spending pressures stemming from population aging. Along with such efforts, growth-enhancing reforms would help strengthen debt reduction and, over time, could reduce the needed adjustment.

Several measures could be considered. Building on the progress made, reform efforts on tax evasion and tax compliance should continue. Rationalizing tax expenditures would help broaden the taxbase, bolster revenue, and reduce complexity. Eliminating the preferential flat-rate for income on self-employment would address equity concerns and prevent revenue loss. Given the robust labor market and high corporate profits, hiring subsidies should be replaced with productivity-boosting measures. Updating property values in the cadastre would increase revenue and could ensure more equitable tax treatment. These measures, by addressing distortions, are expected to have limited adverse effect on economic activity.

In the event of new spending pressures or macroeconomic shocks, debt-reducing efforts should continue. Given the limited fiscal space, any new spending measures, including for defense, should be fully compensated by further savings elsewhere. Fiscal consolidation efforts combined with growth-enhancing reforms would need to continue even in the event of all-but-the-most-severe adverse macroeconomic shocks, rendering automatic stabilizers the primary counter-cyclical response. Resources from EU funds should be safeguarded for productivity-enhancing investments.

Beyond the near term, it will be important to contain latent spending pressures. Pension-related spending pressures could be contained by avoiding costly early retirement schemes. At the same time, raising the effective retirement age would help boost labor supply. There is also scope to enhance transparency and monitoring of the net expenditure path within the Medium-Term Fiscal-Structural Plan (MTFSP), while maintaining comprehensive reporting of key fiscal indicators. Although the stock of public guarantees is gradually declining, it remains sizable, calling for continued prudent management, centralized monitoring, and adequate provisioning. In addition, publicly guaranteed loans should not substitute for on-budget spending, as such measures undermine budgetary discipline and distort resource allocation.

Financial sector policy: Protecting financial sector resilience

Continued vigilance will be important to safeguard financial sector soundness. Strong profitability, sound asset quality, and adequate liquidity and capital positions have helped strengthen the banking sector. In this respect, amid a still-negative credit gap, maintaining the current neutral countercyclical capital buffer remains appropriate, as does the continued implementation of the systemic risk buffer at 1 percent. In addition, maintaining close monitoring of loan quality is warranted, particularly given the uncertain outlook and risks to firms exposed to the potential impact of trade tensions. Regarding non-bank financial institutions, the rebound in life insurance premium income has helped mitigate risks in the life sector. While financial sector exposures to the domestic sovereign have declined from previous highs, they remain sizable and, hence, pose a vulnerability that requires continued monitoring.

Continuing to address weaknesses among some less significant institutions (LSIs) remains a priority. Within the overall soundness of the banking sector, vulnerabilities exist among some LSIs. Further enhancing oversight—through targeted inspections, in-depth reviews of credit risk management practices and governance, and continued monitoring of nonperforming loans—would help address these risks. In this regard, the ongoing inspection program by the Bank of Italy to ensure compliance with IT security standards is welcome, and LSIs should continue to integrate cyber risks into their governance and risk management frameworks. Timely escalation of corrective measures for weak banks would support further improvements in capital adequacy and operational efficiency.

Structural policies: Implementing reforms to boost growth

To tackle persistent productivity challenges and unlock stronger potential growth, comprehensive and sustained reforms are crucial. The authorities’ ongoing efforts to advance their reform and investment agenda through the NRRP are welcome, as are their longer-term commitments under the MTFSP. With the NRRP window rapidly closing, continued efforts to ensure its full and timely delivery will be essential. Looking ahead, leveraging the design and implementation lessons from the NRRP will support successful execution of future reforms and help secure a durable lift to growth. More broadly, reforms should be clearly specified and prioritize strengthening human capital, expanding labor supply, and revitalizing the private sector’s capacity to innovate and adopt frontier technologies. Enhancing the workforce is vital to mitigate the impact of a shrinking working-age population and to meet the growing demand for high-skilled labor. Policies aimed at increasing female labor force participation—such as enhancing access to childcare and removing disincentives like tax credits for dependent spouses—should be further strengthened and would support both economic growth and pension system sustainability.

Reviving private sector dynamism and innovation requires improved access to finance, especially risk capital, and greater policy predictability. Italian firms have long struggled to scale up and innovate. Eliminating tax incentives that favor small firms and facilitating the exit of unproductive firms, including through the timely implementation of the new insolvency code, would promote more efficient resource allocation and enable high-performing firms to grow. Deepening national capital markets—particularly by broadening access to risk capital—and ensuring a more predictable regulatory environment are crucial to support the investment needed for technological upgrades and the digital transition. At the European level, advancing the single market and making progress towards the savings and investment union will further help firms achieve economies of scale and improve access to capital. Industrial policies should be deployed cautiously, be targeted to specific objectives where externalities or market failures prevent effective market solutions, be coordinated at the EU level, and avoid favoring domestic producers over imports to minimize trade and investment distortions. 

Accelerating the transition to renewables, adapting to a changing climate, and investing in resilient energy infrastructure are essential to reduce extreme weather impacts and energy import dependence. Climate-related risks and energy security are macro-critical for Italy, given the reliance on agriculture, tourism, and foreign energy supply. The 2024 National Energy and Climate Plan provides a strategic foundation but more ambitious action is needed to meet 2030 climate targets and improve energy security. Strengthening grid infrastructure, expanding storage capacity, and streamlining permitting processes are critical to support renewable integration. Deeper integration into EU electricity markets would enhance resilience, reduce price volatility, and improve the efficiency of renewable energy use.

****

We are grateful to the Italian authorities and our other counterparts for their time, frank and open discussions, and warm hospitality.

Desideriamo esprimere la nostra gratitudine alle autorità italiane e a tutti gli altri interlocutori per il tempo dedicatoci, per la franchezza e la disponibilità dimostrate nel corso dei colloqui e per la calorosa ospitalità.

 

 

https://www.imf.org/en/News/Articles/2025/05/28/05282025-mcs-italy-staff-concluding-statement-of-the-2025-article-iv-mission

MIL OSI

Source: IMF – News in Russian

May 28, 2025

Ethiopia has taken historic steps to address macroeconomic imbalances while fostering sustainable growth

Over the past year, Ethiopia—Africa’s second most populous country—has embarked on a comprehensive transformation of its monetary and exchange rate regimes. After decades of tight control, the country has liberalized the foreign exchange regime, adopted a more flexible exchange rate, moved to an interest rate-based monetary policy, and ended central bank financing of government. In parallel, the National Bank of Ethiopia (NBE) is updating its legal framework and internal organization. 

These reforms aim to address acute foreign exchange shortages and inflation, creating conditions for high, sustainable growth. The authorities are also tackling budgetary constraints, financial vulnerabilities in state-owned enterprises and state-owned banks, and a sovereign debt restructuring while mitigating social impacts and managing humanitarian pressures. The IMF is supporting Ethiopia’s reform efforts through a four-year $3.4 billion Extended Credit Facility Arrangement.

During the 2025 IMF-World Bank Spring Meetings, Mamo Mihretu, Governor of the National Bank of Ethiopia discussed these key reforms with Abebe Aemro Selassie, Director of the IMF’s African Department. The following is an edited transcript of the conversation, focusing on key highlights (view video). 

Abebe Aemro Selassie: Ethiopia is undergoing significant reforms that are reshaping its economic landscape. Can you provide some context regarding the state of the economy before these reforms?

Mamo Mihretu: After two decades of sustained economic growth, primarily driven by public investment, Ethiopia faced unsustainable macroeconomic imbalances. The state’s reliance on external creditors, the large public bank, and NBE led to foreign exchange shortages, limited access to credit for the private sector, high inflation, financial stability risks, and debt vulnerabilities.

Abebe Aemro Selassie: What are the primary objectives of the reform agenda that Ethiopia has embarked upon?

Mamo Mihretu: We launched our Homegrown Economic Reform Program in 2019. The objective of the reforms was to address fundamentally, boldly, and conclusively the sources of macroeconomic instability in Ethiopia and create a much more open, investment-friendly, and private-sector-friendly environment. These objectives are critical for our job creation agenda that will increase income and improve livelihoods.

Abebe Aemro Selassie: Can you elaborate on some of the key reforms in Ethiopia’s monetary policy?

Mamo Mihretu: We have made historic changes, including the revision of the Central Bank Act to prioritize price stability. We introduced a monetary policy rate, implemented open market operations for liquidity management with banks, and established a Monetary Policy Committee to advise on monetary policy decisions based on comprehensive assessments of economic conditions. Interest rates are now positive in real terms. Inflation has declined from 30 percent to 13 percent.

Abebe Aemro Selassie: What about the reforms related to foreign exchange? What changes have been implemented?

Mamo Mihretu: Ethiopia has a market-based foreign exchange regime for the first time in five decades. We comprehensively liberalized foreign exchange transactions and eliminated the requirement to surrender export earnings to the NBE. The early results have been promising; we expect exports to double and have already tripled our foreign reserves, while foreign exchange availability has also increased.

Abebe Aemro Selassie: Communication appears to be a vital aspect of your reform strategy. Can you discuss its importance?

Mamo Mihretu: Building credibility and trust is essential. We are investing in transparent communication and actively monitor market dynamics. By maintaining open channels of dialogue with stakeholders, we aim to foster a supportive environment for these reforms.

Abebe Aemro Selassie: What lessons have emerged from your experience in implementing these reforms?

Mamo Mihretu: Several key lessons stand out. First, preparation and coordination among government agencies are crucial. Second, the sequencing of reforms matters; it helps maintain stability and manage public expectations. Finally, adapting to evolving economic conditions is vital for the success of any reform effort.

Abebe Aemro Selassie: What are the next steps for Ethiopia in terms of reform and economic development?

Mamo Mihretu: We have to deepen the current monetary policy reforms as we move to a fully-fledged interest-rate based monetary policy. We are also working on deepening the foreign exchange market. Most importantly we are decisively addressing macroeconomic instability to create a strong foundation for sustainable growth.

https://www.imf.org/en/News/Articles/2025/05/28/cf-ethiopias-central-bank-leading-transformative-reform

MIL OSI