Saudi Arabia Enjoys Growth, Low Inflation
Saudi Arabia, buoyed by record-high oil prices, is enjoying solid growth and low inflation, a trend that is expected to continue over the medium term. The main downside risk is the unlikely event of a decline in global oil demand, says the IMF in its annual health check of the Saudi economy.
Growth for 2007 is projected at 4.1 percent, despite an expected contraction in oil production, and is supported by strong activity in the non-oil sector. Inflation will remain in the range of 3 percent.
Over the next five years (2008–12), real growth is expected to average 5.6 percent. Although public sector demand will continue to be an important engine for growth, non-oil activity in the private sector will expand further because of the government’s continued implementation of structural reforms, which have improved the business climate.
Poverty Reduction Loan Installments for Nepal, Mali
The IMF Executive Board approved disbursements totaling $19 million to Nepal and Mali under the countries’ Poverty Reduction and Growth Facility (PRGF) arrangements.
The Board approved releasing $16.9 million to Nepal following the fifth and final review of its three-year arrangement, under which the strife-torn country received a total of $79.1 million. “The Nepalese authorities are to be commended for implementing prudent macroeconomic policies and structural reforms under difficult political circumstances,” IMF Deputy Managing Director Takatoshi Kato said in a statement.
Mali received $2.1 million in the sixth and final disbursement of a $14.6 million arrangement approved in June 2004. The concessional PRGF loans, which carry an interest rate of 0.5 percent and are repayable over 10 years with a 5½-year grace period, support poverty reduction strategies devised by poor countries.
Kenya Gets $59 million as Reforms Progress
The IMF’s Executive Board approved a disbursement to Kenya of $59 million under its three-year Poverty Reduction and Growth Facility arrangement of 2003. First Deputy Managing Director John Lipsky noted in a statement that the country’s economy is growing strongly against the background of sound macroeconomic management and progress in structural reforms. At the same time, its external position has strengthened. “The sharp increase in spending envisaged in the 2007/08 budget entails some risks. However, the authorities are taking steps to address these risks,” Lipsky added.
Flexible Exchange Rate Helps Colombia
Colombia’s flexible exchange rate had helped it weather well the recent turbulence in global financial markets, the IMF noted on November 9 after its annual health check of the economy. The Fund said growth will remain strong in 2007 and slow to 5 percent in 2008, while inflation will decline. Colombia’s economic performance has been impressive, with economic growth last year equaling its fastest pace since the late 1970s and topping the Latin American average, the IMF noted.
IMF Endorses Senegal’s Program
The IMF Executive Board approved a three-year Policy Support Instrument (PSI) for Senegal to back the country’s efforts at consolidating macroeconomic stability, increasing its growth potential, and reducing poverty. The program focuses on keeping a sound fiscal policy and enhancing fiscal governance.
PSIs are designed for low-income countries that may not need, or want, IMF financial assistance, but still want IMF advice, monitoring, and endorsement of their policies. The instruments are voluntary and requested by the country. IMF Managing Director Dominique Strauss-Kahn said that despite “temporary setbacks suffered in the last two years, Senegal has achieved a high degree of macroeconomic stability and robust growth over the last decade. The Policy Support Instrument is viewed as the appropriate next step in the Fund’s relations with Senegal.”
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Booknote: Postconflict Case Studies—How the IMF Is Helping
Restoring monetary and financial systems in postconflict countries features in a new IMF book. Case studies include tales of the personal courage of people in countries emerging from conflict. The study on Rwanda notes that the National Bank of Rwanda “was faced with quite a different situation from the one prevailing before the genocide: a large number of senior positions were now held by new staff” because the previous staff had lost their lives or had to flee the country.
Building Monetary and Financial Systems: Case Studies in Technical Assistance, Charles Enoch, Karl Habermeier, Marta Castello-Branco (eds.), International Monetary Fund, Washington, D.C., 2007, $29.