The International Monetary Fund Highlights Guatemala’s Progress on Monetary Policy

The International Monetary Fund's technical mission called for continued improvement of the country's investment climate.

by Pamela Contreras

Guatemala City. By Julio Morales -AGN.- A technical mission of the International Monetary Fund -FMI- in Guatemala examined the tax, monetary, exchange, and financial policies.

The president of the Monetary Board and Banco de Guatemala -Banguat- led the closing meeting of the mission’s visit.

Authorities from Banguat, the Ministry of Public Finance -Minfin- and the Superintendency of Banks -SIB- attended the meeting.

According to Minfin, the mission carried out the evaluation from February 28 to March 13. During this period, the country’s macro-fiscal context was presented, highlighting the evolution of the tax results for 2022 and the outlook for 2023.

The Evaluation 

María Oliva, the IMF representative, pointed out that Guatemala has progressed in economic policy.

During a press conference, the technical mission mentioned that Guatemala has a long history of strong cautious macroeconomic policies, which were classified as follows:

  • In 2021, the Guatemalan economy showed resilience and continued to grow within macroeconomic and financial stability despite the unfavorable global situation.
  • Remittance inflows and credit to the private sector contributed to maintaining solid levels of consumption.
  • Guatemala has significant international monetary reserves.
  • The increases in the main interest rate have given the central bank an unambiguous message to fight against  inflation.

Further Details 

According to Oliva, inflation pressures in Guatemala continue to make  implementing short and medium-term policies challenging.

However, he mentioned that although the principal factors determining the inflationary rebound have been external, the second-round factors and demand and supply pressures have been gaining strength and contributing to maintaining inflation.

He added, “A decrease in external prices and the effects from March 2023 will contribute to reducing pressures.”

Due to the effects above, the IMF mission said that efforts toward monetary policy  would be necessary.

Likewise, they indicated that regarding the risks in the overview, the perspectives expect to remain favorable, although the chances are biased to the downside.

Concerning  the tax policy agenda, the experts explained that Guatemala has a renewed opportunity to strengthen public finances and the spending program.

The mission appreciated the country’s efforts to strengthen the tax administration with high import prices, as explained in the collection estimate. However, the steps must address the country’s investment needs. The mission recognized that these results require continuity in management.

They also explained it is necessary to approve a tax reform in the future to close social and investment gaps. In addition, it urged to continue strengthening public spending efforts.

The mission also recognized Guatemala’s programs, such as Guatemala Moving Forward, and the execution of the infrastructure plan that incorporates resilience to natural disasters.

Finally, it highlighted that the financial sector has proven resilient and continues supporting the country’s development.

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