Summary:KEY ISSUES
Context. Growth remains robust while inflation has fallen to very low levels. However,
declining commodity export prices and a substantial fiscal slippage have weakened the
external position. The authorities have already tightened fiscal policy, but more will be
needed to buttress macroeconomic stability and entrench fiscal sustainability.
International reserves have dipped but remain adequate. Price competitiveness appears
acceptable, but warrants continued vigilance. Good progress is being made to
strengthen the monetary policy framework, financial sector resilience, the fiscal
framework, and structural competitiveness, with TA from the Fund and other institutions.
Focus of the consultation. The consultation focused on policies to offset recent fiscal
slippages and safeguard the fixed exchange rate, ensure long-term fiscal sustainability,
strengthen financial sector resilience, and advance structural reforms to enhance
competitiveness and growth.
Policy recommendations:
? Tighten fiscal policy to strengthen macroeconomic stability and ensure sustainability.
? Establish a fiscal framework appropriate for this resource-rich country. This should
comprise a fiscal anchor consistent with sustainability, medium-term expenditure
ceilings, a Sovereign Wealth Fund, and revenue diversification including a VAT.
? The monetary authorities should stand ready to contain demand pressures if fiscal
adjustment proves insufficient, and press ahead with efforts to establish indirect
instruments of monetary policy and strengthen the financial sector resilience.
? Structural reforms to improve the business environment and increase the efficiency
of public utilities will be needed to enhance competitiveness.
Past surveillance. During the 2012 Article IV consultation, Executive Directors
underscored the need for sound management of future mining revenues and building of
policy buffers, and welcomed the significant improvement in the fiscal position in 2011
as well as the authorities’ commitment to strengthening financial sector resilience and
implementing prudent policies going forward. While there has been good progress in
strengthening monetary and financial sector policies, and public financial management
is being improved, the fiscal stance has slipped significantly.
