Development: On 31 October a mission from the International Monetary Fund (IMF) concluded a week-long working visit to Nicaragua.
Significance: The IMF mission’s report was not wholly negative, despite forecasting a 4% GDP contraction this year, but it did stress the importance of the Nicaraguan government undertaking structural reforms which would “require obtaining broad support”. Nicaragua’s main private sector lobby (Cosep) latched on to the IMF’s recommendation to contend that there would be no ‘broad support’ without a political accord to end months of violence.
- The IMF mission, led by Roberto Garcia-Saltos, conducted a week-long visit to Managua during which it claimed to have held “fruitful discussions” with senior officials in the government led by President Daniel Ortega, representatives from the private sector, and the donor community.
- It concluded that the Nicaraguan economy faced “multiple shocks”, with the “political instability” since April damaging consumer and investor confidence, and activities such as tourism and construction suffering “lasting impacts from a reduction in demand”. It warned that foreign direct investment (FDI) retrenchment and a reduction in credit to the private sector could “exacerbate the effect of the shocks”.
- The IMF mission argued that there were “a few positive signs”, namely “commendable” efforts to support the continued liquidity of commercial banks, and belt-tightening measures to “partially offset the tax revenue shortfalls because of the economic downturn”. But it said that structural reforms were necessary to preserve macroeconomic and financial stability and that these required “broad support”.
- The president of Cosep, José Adán Aguerri, responded to the IMF report by saying that ‘broad support’ necessitated recovering the confidence of the private sector which would not be forthcoming without a political accord.
- The prospect of such an accord, however, is receding. The dialogue process between the government and opposition groups, mediated by the Nicaraguan Catholic Church, broke down in June. The Ortega administration is now accusing sectors of the Church of actively promoting a coup.
Looking Ahead: The IMF will conduct an Article IV consultation in Nicaragua during the first half of 2019. As things stand there is little chance of a political accord being struck before then.
