IMF praises UAE’s economic and financial developments

Khaled Mohamed Balama, Governor of the Central Bank of the UAE (CBUAE) met with the International Monetary Fund (IMF) mission, led by Ali Al-Eyd, during their recent visit to the UAE to discuss the country’s economic and financial developments.

The IMF mission met with several stakeholders and policymakers from across various government departments to discuss the latest monetary and financial system developments, the outlook, and the UAE’s monetary policy priorities.

Following the conclusion of the meetings, the IMF praised the open dialogue with the authorities and stakeholders and issued a statement on their findings.

The IMF mission applauded the social and business-friendly developments which continue to attract foreign inflows of capital and talent, underpinning economic growth.

According to the IMF, the economy continues to benefit from the strong domestic activity and estimates non-hydrocarbon GDP growth to exceed 4 per cent this year and remain at a similar pace in 2024.

Additionally, the IMF welcomed the UAE’s continued efforts to strengthen the macro-prudential and resolution and recovery frameworks, promote the effective management of non-performing loans, and advance the National AML/CFT Action Plan.

Commenting on the success of the mission, the Governor of CBUAE said, “We value the continued and transparent collaboration with our major international stakeholders, such as the IMF. The CBUAE is committed to upholding international best practices to support the continued stability of the financial system and contribute to sustainable global economic growth.”

The European Central Bank and the Bank of England are now “in the right spot” on interest rates but must maintain tight monetary policy for “as long as necessary” to return inflation to 2% targets, International Monetary Fund European director Alfred Kammer said on Friday.

Kammer told a press conference during IMF and World Bank annual meetings in Morocco that central banks need to avoid easing monetary policy prematurely as positive data comes in that indicates easing inflation. They also must be ready to respond should negative surprises occur showing inflation more persistent than expected, he said.

Meanwhile, after getting debt relief from China, Ethiopia is requesting similar treatment from other creditors, the International Monetary Fund’s deputy director for Africa said on Friday.

In early 2021, Africa’s second-most populous country requested a debt rework under the Group of 20’s Common Framework, an initiative for restructuring government debt aimed at low-income countries, and has also been seeking an IMF loan.

Progress was complicated by a two-year civil war that broke out in November 2020, leading to the deaths of thousands of people and displacing millions more.

Ethiopian authorities said in August that China was allowing Ethiopia to suspend debt payments for the fiscal year running until July 7, 2024.

“The Chinese authorities have already provided debt relief to Ethiopia and we understand that they’re in the process of requesting a similar treatment from other creditors. So this is very encouraging,” Annalisa Fedelino said in comments to reporters at the IMF’s annual meetings in Marrakech, Morocco.

“There is a debt service suspension with China, which is providing substantial relief,” she said, adding that this was the agreement announced in August.

Fedelino added that the IMF was “almost there” on a loan programme agreement with Ethiopia and that once that was in place the Fund was confident that a Common Framework debt rework would move quickly.

“Policy discussions will continue and most likely we will need another mission, ... we hope to have it in the next few weeks,” she said.

A visit by IMF staff to Ethiopia from Sept. 25 to Oct. 3 ended without a loan agreement.

Ethiopia’s external debt totalled $28.2 billion at the end of March, according to government data.

It includes a $1 billion international bond maturing in December 2024. Between 2006 and 2022, Chinese lenders committed to more than $14 billion of loans to the landlocked country, according to Boston University.

“The authorities have expressed a view that they want to move to a market-determined exchange rate and this is a very ambitious reform that we would require,” Fedelino said.

Ethiopia regularly suffers from foreign exchange shortages and a wide gap between the official and black market currency exchange rates.

On the black market, $1 currently buys around 100 birr, compared to 55.35 birr at the official exchange rate, which is controlled by authorities.

Huge fiscal spending on the military is fuelling short-term economic growth in Russia, but looking at the longer term picture the outlook is “dim”, the International Monetary Fund’s European Director Alfred Kammer said on Friday.

The IMF said this week that significant spending and resilient consumption in a tight labour market would support gross domestic product (GDP) growth of 2.2% this year in Russia, but it lowered its forecast for 2024 growth to just 1.1%.

“We are seeing a considerable fiscal impulse in Russia from ramping up spending related to the war,” Kammer told a press conference at the IMF meeting in Marrakesh that was also broadcast online.

“That is really a short-term impact you are going to see of fuelling growth in the economy,” Kammer said.

“When we look at the longer-term picture on Russia, the outlook is dim because (of) sanctions, because the reduction of (the) technology transfer will hurt the productive capacity and productivity growth in the medium term.”

Russia is throwing resources at its military, with draft budget plans showing defence spending will account for almost one third of all expenditure next year, as Moscow diverts funds from schools and hospitals to finance its “special military operation” in Ukraine.

Kammer said the IMF had downgraded Russia’s potential growth from estimates made before the war started.

“What that means is that Russia has stopped converging towards Western European levels of GDP, so that is quite a change in the outlook of the Russian economy,” Kammer said.

Agencies