16:19 | San Salvador (El Salvador), Jul. 24.
Peru’s fiscal policy management and consolidation served as model during the regional assessment held at the XIII Regional Conference on Central America, Panama, and the Dominican Republic, organized by the International Monetary Fund (IMF) in El Salvador.
The event, held in San Salvador, gathered up quotes on the important role fiscal responsibility initiatives could play in helping the region strengthen its fiscal policy frameworks.
“Drawing on the lessons from Peru and the Netherlands, participants discussed the benefits of fiscal consolidation rules, including best practices for credible fiscal institutions and the role of a communication strategy in building a broad public consensus for continued fiscal responsibility,” reads the statement at the conclusion of the event.
According to the document, which included statements by Deputy Managing Director of the IMF, Mitsuhiro Furusawa, there was agreement that fiscal adjustment in the region should be carefully calibrated, so as to reduce any negative effects on growth and jobs.
As a result of the global financial crisis and country-specific factors, several countries in the region are facing increasing public debt burdens and lacking resources to finance priority spending.
The statement indicates that besides stronger fiscal institutions, those countries need to close fiscal sustainability gaps, create space for priority social and investment projects, and allow for countercyclical fiscal responses.
The document states that the normalization of monetary conditions in the United States may lead to new bouts of volatility in global financial markets.
“Although the region is fairly well positioned to manage these risks, participants felt that more could be done to reinforce defenses. Based on the Mexican experience, participants noted that the region needs to keep strong foreign reserve cushions and solid debt structures,” it added.
Greater exchange rate flexibility could be useful to safeguard against adverse external shocks. Moreover, growing financial integration within and outside the region provides benefits but also poses new risks.
Although liquidity cushions and capitalization remain adequate in the banking systems, participants supported policies that further improve cross-border consolidated supervision, promote the use of macro-prudential tools to hedge against interconnectivity risks, and upgrade crisis prevention plans at the regional level.
The meeting brought together central bank governors, finance ministers, and banking superintendents of Central America, Panama, and the Dominican Republic, and senior IMF officials.
The regional conference saw the participation of President of El Salvador, Salvador Sanchez-Ceren; Governor of the Bank of Mexico, Agustin Carstens; Director of the Netherlands Bureau of Economic Policy Analysis, Laura van Geest; and former Finance Minister of Peru, Luis Carranza.
(END) JCC/JJN/RMB/MVB
Published: 7/24/2015