The International Monetary Fund (IMF) welcomed on Wednesday the new measures adopted by the government of Peru to reduce dollarization in the economy, but encouraged authorities to continue to implement structural reforms in view of eventual external risks.
Under Article IV of the IMF's Articles of Agreement, IMF noted the Andean country “remains a one of the best performing economies in Latin America,” but stated it is “still highly dollarized.”
In this context, IMF Executive Board encouraged the authorities to continue to implement ambitious structural reforms to sustain inclusive growth and diversify the economy, including through further de-dollarization.
This dollarization in the Peruvian economy “increases the risks from exchange rate volatility,” IMF report states.
Directors agreed that strengthening prudential requirements on dollar lending […] could further support the de-dollarization process.
This move should be followed up by encouraging the private sector to hedge its foreign currency exposure.
IMF explained that despite the unfavorable external context, the Peruvian economy ended 2014 at 2.4%, almost three times the regional average in the same period, but seeing a notable decline from 5.8% a year earlier.
“Real GDP is projected to expand at about 3.75 percent this year, contingent on the reversal of last year’s supply shocks and policy stimulus,” the document reads.
The organization highlighted “the country’s solid macroeconomic policies and fundamentals, and noted that “risks to the outlook are tilted to the downside.”
As for inflation trajectory, IMF said it “closed the year slightly above the upper band of the central bank’s target range […] but expectations remained well anchored.”
(END) AFP/JCC/RMB/MVB
Published: 5/27/2015