Guatemala's Fiscal Fragility

The International Monetary Fund is warning that adjustments are needed in order to increase tax revenues and reduce the state's fiscal deficit.

Friday, August 9, 2013

They note that "... the tax reform passed in 2012, which came into effect on January 1 this year, broadens the tax base and gives the government more tools to enforce fiscal and supervisory controls and eliminates tax exemptions and reduces corporate tax rates," noted an article in S21.com.gt.

Although this could raise up to 1.5% of GDP, the IMF recognizes that the reform will not solve the country's legal problems. They also note that public debt (24% today) is stable relative to other countries in the region, but a little high in terms of revenue (224%) when compared to other countries with a similar macroeconomic conditions.

"... Although public debt is low and stable, limited fiscal flexibility resulting from the reduction in tax revenue, is weakening public institutions and polarizing the political environment, constraining credit quality."

Moreover, the IMF stresses that inequality in income distribution and poverty put "Guatemala's ratings on one or two levels below investment grade."



More on this topic

IMF on Costa Rica: "Unsustainable Fiscal Imbalance"

December 2016

The favorable conditions in the global economy allowed the country to grow by 4.25% in 2016, and administrative efforts to reduce the fiscal deficit were noted, however they will not prevent the debt /GDP ratio from growing.

From a press release by the IMF:

  • Costa Rica’s economy growing robustly, GDP expected to growth by 4.25% in 2016
  • More needs to be done to stabilize public debt levels
  • Key for government and Congress to reach consensus on VAT and income tax reforms proposals to help address fiscal imbalances

IMF: Costa Rica At Risk of Sudden Financial Adjustment

October 2015

An immediate fiscal adjustment is needed in order to avoid the risk of a possible closure of credit to the country in the international market, which would force an abrupt adjustment.

The warning from the head of the mission at the International Monetary Fund (IMF), Lorenzo Figliuoli, has its origin in the government's fiscal deficit, which this year will reach 5.9% of GDP, while increasing public sector debt reaches 60.4% of production.

Honduras' Fiscal Deficit Close to 40% of GDP

June 2013

The current administration can not implement an international bailout plan, therefore the serious fiscal problem will be inherited by the next government.

"The reality is that we have a huge fiscal problem, a fiscal deficit of 6% for Honduras is really high, the country has no access to external financing to meet a deficit of this magnitude and this has resulted in a growth of domestic debt," said the former finance minister, José Arturo Alvarado.

IMF Completes Review of Honduras

April 2011

IMF Executive Board Completes First Review of Honduras' Economic Program.

The Executive Board of the International Monetary Fund (IMF) today completed the first review of Honduras' economic performance under a program that combines two different IMF credit lines, the Stand-By Arrangement (SBA) and the Stand-By Credit Facility (SCF).