core sector communique

Statement at the Conclusion of the IMF Co-Sponsored Tenth Regional Conference on Central America, Panama, and the Dominican Republic

 

July 29, 2011

The following statement was released today in Managua, Nicaragua, by the Deputy Managing Director of the International Monetary Fund (IMF), Ms. Nemat Shafik, the Director of the Western Hemisphere Department, Mr. Nicolás Eyzaguirre, the vice-president of the Central American Monetary Council, Mr. Rodrigo Bolaños Zamora, the President of the Central American Council of Finance Ministers, Mr. Alberto José Guevara Obregón, the Secretary General of the Central American Council of Financial Sector Superintendents, Mr. Victor Urcuyo, and Mr. Antenor Rosales Bolaños, President of the Central Bank of Nicaragua and host of the conference:

“The ministers of finance, central bank governors, and financial sector superintendents of Central America, Panama and the Dominican Republic, jointly with representatives of IMF management and staff, and representatives of other international financial institutions, met in Managua, Nicaragua, during July 28–29 to discuss the regional economic outlook and identify policies to consolidate macroeconomic and financial stability and raise growth. This year’s conference focused on the prospects for the global economy and its impact on the region, the fiscal policies that would be most appropriate for the region in the current juncture as well as on the structural reforms that would help boost economic growth over the medium term.

“The conference took place against the backdrop of a global expansion that remains unbalanced. Growth in many advanced economies is still weak, while growth in much of the emerging and developing world continues to be strong. The US economy is not likely to grow at very fast rates on the coming years. Similarly, commodity and food prices are expected to remain relatively high though stable. Participants agreed that greater risks are also posed by the depth of the fiscal challenges in Europe and United States.

“The economies of Central America, Panama, and the Dominican Republic are gradually recovering from the global economic crisis of 2008–09. In most countries, prudent fiscal policies in the years leading up to the crisis allowed to mitigate the impact of the global slowdown by letting fiscal deficits widen. Participants in the conference emphasized that, as the region recovers, fiscal policy should aim to rebuild the buffers used during the global recession, including ensuring sustainability of debt and public finances. Participants agreed that in most countries the consolidation process should focus on keeping government expenditure in check, increase its efficiency, and redoubling efforts to increase tax revenues.

“Participants agreed that further strengthening the monetary policy frameworks of the non dollarized economies of the region would help increase the effectiveness of monetary policy and achieve lower and more stable inflation rates. In this context, it was discussed how to improve other monetary control instruments, and the importance of increasing exchange rate flexibility to help reinforce price stability as the main objective of monetary policy. Another key step to strengthen monetary policy frameworks would be to further strengthen central banks, particularly as some countries aim at enhancing or moving towards inflation targeting regimes.

“The key medium-term challenge for Central America is to raise economic growth and consolidate macroeconomic stability, at the same time reducing poverty. In addition to rebuilding the fiscal space and strengthening monetary frameworks, the region would benefit from implementing a broad agenda of structural reforms. Participants agreed that, over the long-term, fostering private and public investment and strengthening human capital could increase economic growth substantially. Moreover, it is essential to further increase the flexibility of the Central American economies and consolidating financial sector reforms, including macro-prudential measures. The financial superintendents underscored that, while there has been important progress in recent years, there is ample scope for further strengthening supervisory practices, particularly risk-based supervision and expansion of the supervisory perimeter.

“Participants commended the continued support provided by the IMF to the countries in the region and the close policy dialogue. Participants also commended the strengthening of technical assistance and training activities in the region provided by the Central America-Panama-Dominican Republic Regional Technical Assistance Center (CAPTAC-DR). Participants also conveyed their thanks to the governments of Canada, Germany, Mexico, and Spain, as well as to the European Commission, the Inter-American Development Bank, and the Central American Bank for Economic Integration for their financial support to the Center.

“Participants agreed that the next annual conference would take place in July 26-27, 2012, and expressed their gratitude to the Dominican Republic for offering to host the Eleventh Regional Conference”.