Guatemala Gets IMF Stand-By

The IMF has approved a $935m stand-by agreement for Guatemala, equivalent to 300% of quota. The Guatemalan authorities intend to treat the arrangement as precautionary, meaning that they do not intend to draw on the fund’s resources unless the need arises, the fund says. “The authorities’ fiscal program aims to provide some stimulus to the economy and protect the most vulnerable segment of the population,” says IMF deputy MD Murilo Portugal. The 2009 budget envisages higher spending on labor-intensive public infrastructure projects and a strengthening of the social safety net. “This countercyclical fiscal policy is possible given the low level of public debt, resulting from prudent fiscal policies pursued in the past,” says Portugal. He adds that Guatemala’s banking system is not exposed to risky structured financial products and has consolidated in recent years. “The authorities are nonetheless taking measures to safeguard the liquidity and capital positions of banks through adequate liquidity-provision arrangements by the central bank and a gradual increase in provisioning requirements . . . the government plans to further strengthen financial sector policies by enhancing supervision and regulation and strengthening the framework for bank resolution,” says Portugal.