"Recent macroeconomic developments point to a higher growth rate than was projected during the staff visit in
"Looking ahead, growth is projected to stabilize at about 5.5 percent in 2014 and in the medium term, reflecting a rise in oil production; continued public investment in infrastructure; and strong domestic demand. Although predicted growth over the medium term has picked up, it still falls short of what is necessary for
"The overall fiscal deficit, on a cash basis and including grants, is estimated at 4.1 percent of GDP in 2013, compared to 2.5 percent of GDP in 2012. Higher expenditure, including on investment, contributed to the deterioration in fiscal performance. For 2014, the overall fiscal deficit is forecast at 5.5 percent of GDP, resulting from a continued expansion in the public investment program and fuel subsidies. The medium-term fiscal outlook is a cause for concern, because the fiscal deficit is projected to increase to 5.7 percent of GDP in 2015 before tapering off in the medium term. This development reflects, amongst others, a lackluster revenue performance, set against a continued high level of capital expenditure. The mission noted the accumulation of large contingent fiscal liabilities in the public sector and recommended to prepare a full inventory of these liabilities and to monitor the efficiency of public enterprises closely.
"The mission reiterated its concern about generalized fuel subsidies. The cost of these subsidies remains elevated and crowds out other expenditure that could promote more inclusive growth. The mission advised the authorities to phase out these subsidies gradually and to replace them with targeted social programs.
"Debt vulnerabilities are gradually building up, arising mostly from recent nonconcessional loans. The public debt is projected to rise to almost 24 percent of GDP in 2014 and to reach 38 percent of GDP in 2019. The mission emphasized the importance of mobilizing domestic and concessional resources to finance needed infrastructure projects to the extent possible, complemented with institutional reforms to increase the effectiveness of capital expenditure.
"The overarching goal of the policy discussions was how to spur inclusive growth. The mission noted the challenge of achieving faster and more inclusive growth, which would lower unemployment and poverty. Against this backdrop, the authorities and the mission discussed how to (i) improve revenue performance through strengthened administration and a reduction in customs exemptions; (ii) strengthen public expenditure management; and (iii) improve the business climate to promote private sector-led development.
"The mission advised to develop a comprehensive debt accumulation and management strategy and to monitor its implementation, including the debt service implications of the growing public investment plans and the potential financial liability implications of emerging public-private partnerships.
"The mission emphasized the importance of cooperation with the regional supervisory body to ensure financial stability through strengthened supervision of financial institutions, including microfinance institutions and foreign exchange bureaus.
"The IMF's Executive Board is expected to consider the report on the 2014 Article IV Consultation with
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