Agreement with the IMF: Government will promote a more transparent and autonomous Central Bank
15 junio 2018

On June 14th, the Executive released details of the fiscal and monetary commitments resulting from negotiations with the International Monetary Fund (IMF). The Memorandum of Economic and Financial Policies sent to the IMF Director has yet to be endorsed by the agency. It includes changes to the Central Bank Organic Charter, reduction of bond issuance and the use of International Standards for Financial Reports.

The amendment to the Central Bank Organic Charter aims at providing the bank with greater autonomy, transparency and accountability. The new charter will reinforce price stability as the CB’s key mandate and give it authority to set inflation targets three years in advance, in consultation with the Ministry of Finance. It will also discontinue all direct and indirect Central Bank financing of the government and reduce credit exposure. The bill will be submitted to Congress before March 2019.

In order to improve transparency and accountability, the Central Bank will use International Standards for Financial Reports and it will have to clarify the legal status of international reserves. In case of significant deviations from the set targets, it will have to inform both the National Congress and the Executive branch of the situation and action plan to address it.

The Government will also pursue the elimination of article 27 of the National Budget Law regarding the Priority Investment Program. This program is composed of infrastructure projects, including transportation, generation and provision of energy, educational infrastructure, environmental projects and social housing. Finally, it will allocate resources to the Parliament Budget Office in order to guarantee that it can effectively assess macroeconomic and fiscal forecasts, estimate the cost of new policy initiatives and monitor public finances at the central government level.

The Memorandum assesses that “the risks of the current macro-economic circumstances on the banking sector will be limited because of the small size of the sector, its high level of capital and liquid assets, as well as the limited exposure of banks to the sovereign debt”.

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