Author/Editor:

International Monetary Fund. Western Hemisphere Dept.

Publication Date:

December 20, 2019

Electronic Access:

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Summary:

A 36-month Extended Fund Facility (EFF) arrangement with access of SDR 3.035 billion (435 percent of quota or about US$4.189 billion) was approved on March 11, 2019. The first review was concluded on June 28, 2019. At the beginning of October, an economic reform package was announced, including the immediate liberalization of prices for gasoline and diesel. Following protracted protests and social unrest, the authorities retracted the decree mandating the removal of fuel subsidies. The government continues to negotiate a revised fuel subsidy decree with a broad representation of civil society and hopes to reach an agreement in the foreseeable future. Completing the upgrade of the social safety net, recently initiated by the government, remains a priority and a prerequisite for a successful fuel subsidy reform. On November 17, 70 out of 133 legislators voted to reject an urgent package of economic laws, including key reforms under the program: a tax code, central bank code, and organic budget code. The government submitted a revised version of the tax code to the National Assembly as an urgent economic reform; this version was approved with minor modifications on December 9. The government also intends to submit revised drafts of the central bank and organic budget codes separately in the coming months, after internalizing feedback from lawmakers. Economic growth has slowed as projected in 2019, and in 2020, a less contractionary fiscal stance and higher oil production than previously expected should help mitigate the potential negative impact of political uncertainty and provide a fillip to the economy.