Summary:EXECUTIVE SUMMARY
This is the final review under the Extended Credit Facility (ECF) arrangement. The
program contributed to maintaining macroeconomic stability, and there was progress on structural
reforms. The authorities intend to request a successor arrangement under the ECF. A new finance
minister was appointed in April; uncertainly remains on the timing of elections. Preliminary data
suggest that GDP in FY2014 grew by 3.5–4 percent, while inflation increased slightly to about 5
percent. An increase in fuel prices (in October) should result in fiscal savings of at least 1
percent of GDP during FY2015. The March performance criterion on net international reserves (NIR)
was met, but although the deficit was lower than projected, the performance criterion on net
central bank credit to the central government was missed. Downside risks are significant and
include a pull-back of Venezuela-related flows, a resumption of political tensions, and
vulnerability to weather events. A total of SDR 1.638 million will become available upon completion
of this review, bringing total disbursements under the ECF to
SDR 40.950 million.
Key Policy Recommendations:
• The policy mix, in particular the adjustment going forward, should come from a lower fiscal
deficit rather than from a tighter monetary policy. The FY2015 fiscal deficit should be reduced to
mitigate financing risks as part of a medium-term plan to restore fiscal sustainability.
• The central bank should let the exchange rate adjust more to market pressures. Intervention
should be parsimonious, geared at avoiding excess volatility and disorderly movements in the
exchange rate; it should be guided by fundamentals in the medium term.
• Progress on structural reforms (including on the energy sector and on public financial
management) should catalyze more donor support and is essential for supporting growth. A possible
new ECF arrangement would entrench
macroeconomic stability and promote policies to generate sustained GDP growth.
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