Signs of stabilisation but challenges remain
Overview:
A Staff-level agreement on the completion of the second review of the IMF Stand-By Arrangement (SBA) has been secured. With completion of the relevant prior actions a third IMF tranche could be secured by late August, helping to boost the level of foreign exchange reserves. This positive news adds to signs of stabilisation in the currency market and banking sector. Indeed, current account and inflation developments are encouraging and there may even be the early signs of some bottoming out in the sharp economic downturn. However, the economy is still going to contract dramatically this year and grow only a little, if at all, in 2010. Moreover, recent progress with the IMF may be challenged by the possibility of populist economic policies in the run-in to much anticipated presidential elections in January.