Category: Russian Finance

Source: IMF – News in Russian

July 2, 2025

End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF’s Executive Board for discussion and decision.

• Timor-Leste’s growth is expected to remain robust at 3.9 percent in 2025, supported by fiscal expansion and strong credit growth. Inflation has fallen sharply but is expected to increase moderately in the remainder of 2025.
• To support growth and macroeconomic stability, Timor-Leste’s substantial savings in the Petroleum Fund should be spent better and more prudently. This would deliver higher living standards and preserve fiscal sustainability.
• The implementation of financial and fiscal reforms would accelerate private sector development and make public expenditure more efficient.

Washington, DC – July 2, 2025: An International Monetary Fund (IMF) team led by Mr. Yan Carrière-Swallow visited Dili during June 19-July 2 to conduct discussions for the 2025 Article IV consultation with Timor-Leste. At the conclusion of the discussions, Mr. Carrière-Swallow issued the following statement:

“Timor-Leste’s financial buffers and favorable demographics provide an opportunity to develop its economy. Despite impressive progress since independence, the economy remains under-diversified, and fiscal and external imbalances are large. We welcome Timor-Leste’s efforts for greater economic integration in the global and regional economies through World Trade Organization (WTO) membership and prospective ASEAN accession, which will boost growth and is providing a positive impulse to the government’s reform agenda.

“Growth is expected to remain robust at 3.9 percent in 2025, supported by fiscal expansion and strong credit growth, and to moderate to 3.3 percent in 2026. Inflation, which had fallen sharply last year as global food and energy prices declined but is expected to increase moderately as global food prices rise. Inflation is expected to average 0.9 percent in 2025 and to rise to 1.8 percent in 2026. Risks to the outlook are balanced.

“The 2026 budget should prioritize high-quality spending on physical and human capital, including health and education, while containing recurrent expenditure. The government is rightly focused on identifying measures to contain the public sector wage bill, which has grown sharply in recent years, and on implementing a Value Added Tax by January 2027.

“Absent further reforms, deficits are projected to remain large over the medium term, which would lead to a full depletion of the Petroleum Fund by the end of the 2030s. We recommend a 10-year reform agenda of structural and fiscal reforms, allowing the Timorese government to support private sector development while gradually reducing fiscal deficits to preserve debt sustainability. For 2026, our proposed reforms would be consistent with an expenditure envelope of around US$1.85 billion for central government.

“We welcome continued progress in the government’s financial sector reforms—including an insolvency framework, a secure transactions law, development of corporate accounting standards, and a new law on banking activities—whose implementation would support private sector development. We also recommend accelerating the issuance of land titles and establishing a national digital ID system, which are crucial reforms to boost access to credit, diversify the private sector, and improve the efficiency of public spending.

“The team had fruitful discussions with Minister of Finance Santina Cardoso, Central Bank Governor Hélder Lopes, other senior officials, the private sector, civil society, and development partners. On behalf of the IMF team, I would like to thank the Timorese authorities for their hospitality and excellent cooperation. The IMF stands ready to continue providing capacity development to assist the government’s operations and reform efforts.”

https://www.imf.org/en/News/Articles/2025/07/02/pr25232-imf-staff-complete-2025-article-iv-mission-to-timor-leste

MIL OSI

Source: IMF – News in Russian

July 1, 2025

Washington, DC: At the request of the Kenyan authorities, an IMF Technical Assistance mission led by Rebecca A. Sparkman visited Kenya from June 16-30, 2025, to conduct a Governance Diagnostic. This mission followed the scoping mission held on March 3-5, 2025.

The Governance Diagnostic aims to identify macro-economically critical governance weaknesses and corruption vulnerabilities, and design an action plan with specific, sequenced recommendations and reform priorities.

Reflecting the breadth of the Governance Diagnostic exercise, the visiting team comprised staff from a number of IMF departments, including the Fiscal Affairs; Legal; Finance; Monetary and Capital Markets; and Strategy, Policy and Review Departments, as well as World Bank staff. They engaged with the government and non-governmental stakeholders to examine governance weaknesses and corruption vulnerabilities across core state functions as provided by the IMF’s 2018 framework for Enhanced Engagement on Governance.

To this end, the mission team met with Kenyan authorities, including those responsible for public financial management (including procurement), expenditure policy, tax policy, revenue administration, the mining sector, market regulation, rule of law, Central Bank governance and operations, financial sector oversight, and Anti-Money Laundering/Combatting the Financing of Terrorism. Throughout the mission, the team engaged with Kenya’s anti-corruption and oversight institutions to discuss the effectiveness of legal and institutional frameworks in reducing macro-economically critical corruption vulnerabilities. The mission also met members of Kenya’s National Assembly.

Additionally, the mission met with representatives from civil society, the private sector, business associations, and international development partners to gather perspectives on governance challenges and anti-corruption efforts.

The IMF team would like to thank the Kenyan authorities and other stakeholders for their hospitality, excellent cooperation, and candid and constructive discussions.

Collaboration on the Governance Diagnostic will continue over the next several months. A draft report, which will set out the findings and propose a sequenced, prioritized reform plan, is expected to be shared with the authorities for review and additional input before end of 2025.

https://www.imf.org/en/News/Articles/2025/07/02/pr25233-kenya-imf-staff-completes-governance-diagnostic-mission-to-kenya

MIL OSI

Source: IMF – News in Russian

July 1, 2025

Sarajevo:

Growth has proven resilient supported by expansionary fiscal policies, but inflation has picked up, and risks are elevated due to external shocks and domestic political tensions. Progress towards EU accession could boost confidence, but political hurdles persist. Fiscal policy should focus on restoring buffers and improving spending quality. The authorities should refrain from further discretionary measures that widen the deficit and strengthen contingency planning. Both entities face large financing needs that are expected to be met through external borrowing, with a Eurobond issuance in FBiH and bilateral loans in the RS, along with some domestic issuances. The authorities should prepare contingency plans in case of financing shortfalls. Reforms, including a review of public employment, wages, and social benefits are needed to achieve a debt-stabilizing primary balance.

To safeguard monetary stability, it is essential to maintain the currency board and uphold the independence of the central bank. The authorities should continue to closely monitor financial sector risks and enhance crisis preparedness. The establishment of a country-wide financial stability fund, which would facilitate bank restructuring and provide liquidity on an exceptional basis, would substantially strengthen the financial safety net. To accelerate growth, the authorities need to speed up reforms to improve fiscal governance, protect financial integrity, fight corruption, and step up digitalization. Transitioning from coal to green energy along with preparing for the introduction of EU carbon taxes are major challenges ahead. Placing BiH on a higher growth path and providing its people with more opportunities will speed up income convergence with the EU and reduce emigration.

Recent developments and outlook

Despite a challenging environment, the economy has been resilient. Growth accelerated to 2.5 percent in 2024 from 2 percent in 2023, with strong domestic demand outweighing a decline in net exports. Household consumption was supported by strong growth in credit and remittances; private investment accelerated. The unemployment rate declined to 11.7 percent in Q4:2024, with real wages growing at an annual rate of 8 percent. The current account deficit widened to 4.0 percent of GDP in 2024 from 2¼ percent in 2023, reflecting a drought-induced decline in electricity exports, weaker demand for exports, and higher imports associated with strong domestic demand. Inflation fell to 1.7 percent in 2024 from 6¼ percent in 2023, owing to a slowdown in fuel and utilities prices. However, since end-2024, inflation has been rising again to 3.7 percent (yoy) in May, driven mainly by higher food prices.

The economic outlook remains uncertain amid elevated downside risks. Real GDP is projected to grow by 2.4 percent in 2025 supported by an improvement in net exports, a stronger fiscal impulse, and private consumption. However, the outlook is vulnerable to both domestic and external shocks. A worsening in geopolitical tensions and a resulting slowdown in Europe, or increased commodity price volatility could raise food and energy prices, lower BiH exports and remittances, and dampen domestic demand. An escalation of political tensions could further increase economic fragmentation and weigh on investor confidence and growth. In the absence of faster reform progress, medium-term growth is expected to remain around 3 percent—insufficient for rapid income convergence with the EU. Inflation is expected to remain elevated during 2025, and as food inflation eases, gradually decline from 2026, approaching the ECB target of 2 percent.  

Fiscal policy and reforms

Fiscal performance in 2024 was stronger than expected. The general government deficit turned out to be 1¾ percent of GDP, the same as in 2023, but better than anticipated at the time of the 2024 AIV Consultation. The authorities leveraged a large increase in tax revenues to boost spending on wages, goods and services, social benefits, and public investments.

With fiscal policy expected to ease in 2025, the authorities should avoid further discretionary measures and strengthen contingency planning. Entity budgets and subsequently-adopted measures envisage increases in public wages and pensions, reflecting both legally-mandated indexation and discretionary changes. The widening deficit, which could reach 2.6 percent of GDP, is expected to be mainly financed mostly through foreign borrowing, as well as domestic banks. The authorities should avoid policies that further expand the deficit as this would likely put upward pressure on rising prices and widen external imbalances. Moreover, given mounting downside risks, the authorities should aim to build cash buffers and develop contingency plans. Depending on the severity of a potential shock the authorities should use the available buffers and activate contingency plans.

Over the medium term, the authorities are advised to place fiscal deficits on a firmly declining path starting from 2026, build fiscal buffers, and enhance the economy’s growth potential. Persistently high deficits risk placing public debt on an upward trajectory and may worsen financing terms. Fiscal consolidation should begin in 2026, with the goal of reducing the primary deficit to its debt-stabilizing level, while improving the quality of spending and rebuilding treasury balances. Priority should be given to spending measures that enhance efficiency—particularly by rationalizing the public wage bill through functional reviews and improving the targeting of social assistance programs. These measures should be complemented by revenue mobilization efforts, including broadening the tax base through the reduction of exemptions and development of new revenue sources, such as taxing dividends. Any fiscally costly policies should be strictly avoided or offset. Given significant infrastructure gaps, increasing both the level and quality of public investment should be a key objective.

Fiscal consolidation efforts should be accompanied by institutional and structural fiscal reforms. Strengthening fiscal discipline will require a review of existing fiscal rules to assess whether they are appropriately designed to meet macroeconomic management and developmental needs and whether there are sufficient institutional arrangements in place to ensure that they are met. The recent materialization of contingent liabilities related to international arbitration cases underscores the urgency of enhancing fiscal risk management. This includes timely identification of all sources of fiscal risks, assessment of risk magnitude and likelihood, development of mitigation strategies, and reinforcement of the institutional framework. In this context, improving the oversight and governance of state-owned enterprises (SOEs) is crucial. Reducing inefficiencies in public investment management remains a priority. This involves better project selection, rigorous appraisal processes, efficient and transparency procurement, and stronger portfolio management and oversight. Finally, implementing robust beneficiary registries would improve the targeting of social assistance programs by reducing inclusion and exclusion errors, improving efficiency, and enhancing transparency and accountability.

Currency board arrangement and financial sector policies and reforms

For three decades, the currency board arrangement (CBA) has been a cornerstone of macroeconomic stability and must be preserved. The CBA has ensured the stability of the domestic currency, while reinforcing policy credibility and fiscal discipline. Benefiting from strong institutional independence, the Central Bank (CBBH), has consistently maintained net foreign exchange reserves well above the level of its monetary liabilities. Safeguarding the CBBH’s independence is critical to preserving the credibility and effectiveness of the CBA.

The CBBH should further strengthen the reserve requirement framework. In line with IMF advice, the CBBH applies differentiated remuneration rates on reserve requirements for foreign and domestic currency liabilities. Falling euro area interest rates offer an opportunity to reduce the gap with CBBH remuneration rates on required reserves and the opportunity costs for holding reserves. A further comprehensive review of the reserve requirement framework, with technical assistance from the IMF, and implementation of previous recommendations would further strengthen the CBBH’s capacity to achieve its policy objectives.  

Sustained strong credit growth calls for close monitoring of systemic risks and continued efforts to safeguard banking sector resilience. Credit expansion has been driven by rising wages, declining lending rates, and a booming real estate market. Despite this rapid growth, banks remain well capitalized, liquid, and profitable, while the share of non-performing loans continues to decline. Nonetheless, vigilance is warranted. The authorities should closely monitor financial sector developments and be prepared to deploy macroprudential tools to address risks from credit growth and rising real estate prices. Following introduction of additional capital buffers for systemic risk (SyRB) and domestic systemically important banks (D-SIBs), the macroprudential toolkit should be expanded to include a countercyclical capital buffer (CCyB) and borrower-based measures such as limits on loan-to-value (LTV) ratios and debt-service to income (DSTI) ratios. To preserve resilience, reducing the regulatory capital requirement from 12 to 10 percent as planned from end-2026 should be avoided. The authorities are also advised to avoid further extensions of temporary regulatory measures that aim to contain lending rate increases and to remove limits on bank exposures to foreign governments and central banks.

Progress made on coordination on financial sector issues, under the leadership of the CBBH, should be maintained. Regular financial sector coordination meetings strengthen inter-agency cooperation and help ensure smooth information exchange. Additionally, the authorities are encouraged to establish a country-wide Financial Stability Fund to support orderly bank resolution and to cooperate across state-level institutions and both entities to request a new IMF Financial Sector Assessment Program (FSAP)—already requested by the CBBH—to comprehensively assess resilience and outline a roadmap for further reform, including in the context of EU accession.

We commend the CBBH and the other relevant authorities for their strong efforts to integrate BiH with the Single Euro Payments Area (SEPA). SEPA integration will enable faster and more convenient euro payments across borders within the SEPA area, lower transaction costs, and foster deeper trade and economic integration within Europe. It is crucial that the relevant legislative amendments are adopted in a timely manner to pave the way for the submission of the application for SEPA membership. In addition, the development of the TIPS Clone—the project implemented by the CBBH in cooperation with the Bank of Italy—will provide infrastructure for instant payments.

Structural reforms

Advancing toward EU membership will require a stronger, more coordinated, and results-driven approach. Persistent political fragmentation, lack of consensus among governing bodies, and limited administrative capacity continue to obstruct the adoption and execution of key reforms. In this context, timely adoption and implementation of the EU Growth Plan offers a valuable opportunity. Reforms under the growth plan will align BiH more closely with the EU single market, advance EU accession, and unlock €1 billion in additional financing over 2025–27 period.

The authorities should accelerate energy sector reforms to reduce fiscal risks and prepare for implementation of the EU Carbon Border Adjustment Mechanism (CBAM). Key reforms include phasing out electricity subsidies over the medium term—while protecting vulnerable households—and advancing efficiency improvements in energy SOEs. CBAM charges are set to take effect from 2026, with the largest anticipated impact on the BiH electricity sector. To mitigate this, it is essential to establish a domestic power exchange system and an agreed roadmap and legislative framework for introduction of carbon pricing at the state level. These steps would enable BiH to unlock new investment in renewable electricity generation, reducing the overall burden of CBAM. Implementation of carbon pricing will allow BiH to retain carbon-related revenues domestically and potentially secure a CBAM exemption for electricity exports to the EU.

Reforms that tackle the labor market, governance, and digitalization are also crucial. The authorities should take a structured approach to minimum wage increases that avoids high, frequent, and ad hoc adjustments. Complementary reforms are needed to address low labor market participation (particularly among women) and high youth unemployment. The authorities should urgently implement MONEYVAL priority actions to avoid being grey listed by the Financial Action Task Force (FATF) in early 2026. Grey listing could impose significant economic costs through reduced investment, delays in international payments, and increased transaction costs. Finally, developing digital identity and trust services, and providing government e-services, would strengthen the business environment.

*   *   *   *   *

The mission thanks the authorities and all other counterparts for their hospitality and for the constructive and insightful discussions in Sarajevo and Banja Luka.

https://www.imf.org/en/News/Articles/2025/07/01/cs-070125-bosnia-and-herzegovina-staff-concluding-statement-for-2025-aiv-consultation-mission

MIL OSI

Source: IMF – News in Russian

Comprehensive reforms have fueled Seychelles’ journey out of crisis and its continued resilience in the face of shocks

Todd Schneider is IMF mission chief to Seychelles and an advisor in the IMF’s African Department, where Hany Abdel-Latif is an economist, Pedro Maciel is a senior economist, and Henry Quach is a research analyst.

https://www.imf.org/en/News/Articles/2025/07/01/cf-seychelles-path-to-macroeconomic-stability-and-resilience

MIL OSI

Source: IMF – News in Russian

July 1, 2025

Bern: Switzerland continues to benefit from strong fundamentals, highly credible institutions, and a skilled labor force, positioning it among the world’s most competitive, resilient, and innovative economies. Economic performance has been strong. Nonetheless, Switzerland faces important challenges, including from evolving global economic conditions, rising global trade tensions, and persistent safe-haven pressures and franc appreciation. The ongoing IMF Financial Sector Assessment Program (FSAP) has called for strengthening supervisory, resolution, and crisis management frameworks, including to address gaps exposed during the Credit Suisse crisis, where the authorities are taking action. Navigating these challenges will require broad policy consensus and effective macroeconomic management. Priorities include safeguarding price stability, addressing emerging fiscal pressures, advancing strong financial sector reforms, implementing structural measures to boost productivity and competitiveness, and ratifying the new package of agreements with the EU to enhance external resilience.

Economic Outlook

With global headwinds, growth is projected to remain somewhat below potential in 2025-26. Growth is expected to reach 1.3 percent in 2025 (sporting events adjusted), up from 1 percent in 2024, driven by private consumption supported by real wage growth and stronger construction activity with easier monetary conditions. While unemployment rates have remained near their natural level, recent labor market indicators suggest some softening, e.g., declines in the vacancy-to-employment ratio. This is in line with moderate slack (0.3 percent of potential GDP) in 2025. Growth is projected at 1.2 percent in 2026, converging to potential (1.5 percent) by 2030, driven by a gradual increase in domestic and external demand; trade tariffs in the baseline reflect those prevailing in June 2025. Switzerland’s external position is assessed to be broadly in line with medium-term fundamentals and desirable policies.

With a temporary decline below zero, headline inflation in 2025 will remain subdued; core inflation is expected to stay above zero and within the price stability range. While core inflation through May was 0.5 percent (y/y), reflecting some deceleration in rent inflation, headline inflation declined to -0.1 percent (y/y) driven by franc appreciation, lower electricity tariffs, and softer international oil prices, and is projected to end 2025 at 0.1 percent (y/y). Accommodative monetary policy and higher oil prices are expected to drive headline inflation to 0.6 percent (y/y) by end-2026.

Important risks loom, particularly from external factors. Worsening geopolitical tensions and fragmentation, volatile energy prices, and uncertainty over trade policy and tariff levels could adversely impact confidence, exports, and investment. Sectoral impacts would likely vary. Heightened uncertainty could spark further safe-haven inflows and appreciation pressures with additional challenges for export-oriented and import-competing sectors. If heightened uncertainty extends over the medium term, Switzerland’s growth model could be affected if supply chains are disrupted and R&D spending is scaled back, impacting innovation, productivity, and potential growth. On the upside, a positive resolution of tariff negotiations with the U.S., both for Switzerland and the EU, would lead to better growth prospects and alleviate appreciation pressures. Fiscal easing in Germany may also support activity more than expected. Domestic demand may be bolstered by planned pension payment increases.

Monetary Policy: Mitigating Deflationary Pressures

The recent 25 bps policy rate cut was appropriate considering recent declines in inflation, signs of weakening in the labor market, and external uncertainty. This brought the cumulative policy easing over the past 1½ years to 175 bps and placed the policy rate at zero. Notably, core inflation has remained within the Swiss National Bank’s (SNB) 0–2 percent price stability range, and medium-term inflation expectations have stayed anchored around the mid-point of the range. While additional easing may be needed if deflationary pressures materialize, future policy action needs to consider that trade-offs of further easing become more pronounced when policy rates decline below zero. Negative rates may amplify financial sector risks through lower bank profitability and possibly higher real estate exposures. Given the limited space for further policy rate cuts (the SNB’s main policy tool), these should be aimed at sharp and (or) persistent deflationary pressures that risk de-anchoring medium-term inflation expectations. Temporarily negative headline inflation should not warrant further easing. While intervention in the foreign exchange market (FXIs) may be needed to smooth the impact of safe-haven financial inflow surges, FXIs should continue to be considered cautiously, also given the SNB’s already large balance sheet. To mitigate balance sheet risks, the upcoming review of dividend policy should ensure that robust capital buffers are maintained and refrain from raising distributions.

The SNB should continue to assess whether its monetary policy and communication frameworks warrant adjustments. Given the specific challenges facing Swiss monetary policy in a context of elevated uncertainty and low equilibrium interest rates, a review, possibly with external support as in the case of other major central banks, could be useful. The SNB should consider whether providing additional information in the context of monetary policy assessments or between quarterly meetings could support policy guidance. In light of the heightened uncertainty, attention should be given to clarifying the reaction function (including via scenario analysis) and strengthening the formulation of risks to the outlook.

Fiscal Policy: Addressing Long-Term Fiscal Challenges

The moderately looser fiscal stance projected for 2025 is appropriate given some economic slack. The general government’s overall fiscal surplus is projected to decline to 0.3 percent of GDP in 2025 from 0.6 percent of GDP in 2024, largely reflecting a reduction in the surplus of social security funds. The federal government’s deficit is projected to remain broadly unchanged vs. 2024 (0.2 percent of GDP), as higher defense and social welfare spending is offset by budget consolidation measures. The proposed Relief Package 2027 aims to cut expenditures by CHF 2–3 billion on a permanent basis from 2027 onwards to comply with the debt brake rule amid spending pressures and uncertain tax reform impacts. Staff note the limited room for maneuver implied by the debt-brake rule and the authorities’ choice of spending cuts over tax hikes. If moderate downside risks materialize, automatic stabilizers should operate fully. In the event of severe shocks, targeted transfers may be warranted via extraordinary provisions of the debt brake rule to avoid a deep recession, including one induced by a deflationary spiral. As in the past, staff note that there is a bias toward fiscal surpluses through spending below budget allocations and cautious revenue forecasts; efforts should continue to mitigate this where possible.

Planned increases in pension payments will require additional revenues to preserve the financial strength of social security funds. A new 13^th monthly pension payment, planned to start in December 2026, will require additional outlays of CHF 4.2 billion annually (0.5 percent of GDP). To this end, the Federal Council has proposed financing options, including a VAT rate increase of 0.7 ppt. Continued efforts, including stabilizing Pillar I pension finances for 2030-40, are essential to ensure long-term pension system viability amidst changing demographics and rising costs. Timely repayment (or recapitalization) of the disability insurance (IV) debt to the old-age and survivor’s insurance (AHV) is critical to safeguarding the structural and financial soundness of both schemes.

Demographic trends, climate change, and defense spending pressures create medium-to-long term fiscal challenges. The 2024 Fiscal Sustainability Report projected demographic-related expenditures rising by 3 percent of GDP by 2060; absent compensatory policy decisions, climate mitigation measures to reach the net zero target could raise public debt by 3–4 ppt of GDP by 2040 and 8–11 ppt by 2060, depending on policy choices (e.g., carbon taxation vs. subsidies) and compared to a business-as-usual scenario. Defense spending is expected to increase significantly by 2032. Given the provisions of the debt brake rule, a comprehensive medium-and-long term plan is needed to identify and ensure that revenue increases and spending reprioritization are sufficient to meet these and other needs. A careful assessment is needed to determine whether pressures will emerge at the federal or cantonal level and whether the division of responsibilities across levels of government may need to be adjusted accordingly.

Financial Sector: Enhancing Systemic Resilience

While Switzerland’s financial system demonstrated resilience, systemic risks have remained high due to sizable real estate exposures. Mortgages account for a large share of bank lending and of assets of life insurers and pension funds. Risks are heightened by house price overvaluation, loosening mortgage lending standards, and initiatives to ease affordability criteria for new borrowers. Lower interest rates may further pressure banks, potentially leading to increased risk-taking.

The ongoing FSAP has found the financial sector to be broadly resilient to severe shocks. Systemically-important (SIBs) and most other banks would remain above regulatory capital requirements under stress. Overall, liquidity risks for banks are relatively limited. Insurers also withstand severe solvency and liquidity scenarios. Still, global uncertainty and financial stability risks warrant reinforcing resilience.

The 2023 Credit Suisse (CS) crisis exposed gaps in supervisory, resolution and crisis management frameworks and increased Too-Big-To-Fail (TBTF) risks, which the authorities have begun to address. Drawing on lessons from the CS crisis, the Federal Council has recently proposed several reforms aimed at strengthening the financial sector and thereby reducing the risks for the state, taxpayers and the economy. These would improve the TBTF framework, enhance bank governance, strengthen prevention, early intervention, and crisis preparedness, and expand the powers of FINMA. Staff commends the authorities as these proposals are broadly in line with FSAP recommendations; timely implementation of these bold reforms would further strengthen the long-term stability of the Swiss financial center.

Enhanced legal powers and resources for FINMA are critical to strengthening the effectiveness of supervision. FINMA’s legal powers should be expanded to include a full suite of early intervention powers, immediately enforceable, including the ability to preemptively restrict banks’ business activities, require capital conservation measures, address governance failures, and rectify deficiencies in risk management. FINMA should be able to conduct onsite inspections as necessary, require forward-looking Pillar 2 capital add-on, impose administrative fines, and have broader ability to prescribe binding supervisory standards. FINMA should reduce reliance on external auditors. Enhanced market monitoring and reporting and better mechanisms for market abuse prevention, detection, and enforcement would benefit securities supervision. Overall, more supervisory resources are needed, including for direct supervision in corporate governance, risk management, market conduct, AML/CFT, cyber risk, and recovery and resolution. FINMA needs to be proactive and direct in its engagement with supervised firms across sectors (banks, insurance, securities).

Systemic real estate risks call for expanding the macroprudential toolkit. The FSAP recommends introducing a debt-service-to-income (DSTI) cap in addition to the existing loan-to-value (LTV) cap and a sectoral capital-based instrument, separate from the sectoral countercyclical buffer (CCyB), which already stands at the 2.5 percent maximum. It would be also helpful to establish a formal Systemic Risk Council, comprised of SNB, FINMA, and Federal Department of Finance (FDF) representatives to regularly assess and communicate on systemic risk and decide on necessary policy measures.

Switzerland’s financial safety net should be cast wider to better secure financial stability. Resolution planning should also cover Category 3 banks, which include some large and complex market participants, as well as designated insurance groups, and financial market infrastructures. FINMA, SNB, and FDF need to develop, and practice coordinated crisis response plans. The cap on deposit insurance contributions should be removed, and deposit insurance gradually aligned with international best practices. SNB efforts to establish and communicate a comprehensive emergency liquidity assistance framework—expanding support to all banks and making drawing conditions more flexible—are an important reinforcement of the safety net. The introduction of a Public Liquidity Backstop for SIBs, with the possibility of extending it to non-SIBs that might be systemic in failure, would provide an instrument allowing additional room for maneuver in a crisis.

To protect the resilience and integrity of the Swiss financial center, enhanced vigilance on cyber, AML/CFT, crypto, and fintech risks is paramount. The cyber resilience framework should be broadened to all financial sector entities and external service providers. Progress in rolling out the Registry of Beneficial Ownership should continue, and the legal framework expanded to gatekeepers, including lawyers, accountants, trust, and company service providers. Crypto exposures, which are increasing, should be assessed comprehensively and the related Basel standards implemented in a timely manner. The concentrated and increasingly complex FMI structure warrants closer oversight and enhanced collaboration with foreign authorities, particularly in shared risk management platforms, recovery, and resolution.

Structural Policies: Supporting Productivity Growth and Resilience to Global Shocks

Switzerland enjoys high labor productivity—on par with the U.S. and above European peers. This has been supported by strong R&D, a high-quality education system, and deep global integration that fosters competition and innovation. Multinational corporations in high-value-added manufacturing have driven much of this performance. Labor productivity in small firms and services has lagged, constrained by low R&D intensity, limited access to funding, small markets, and expensive skilled labor. To sustain its competitive edge, Switzerland would benefit from policies that reduce administrative burdens, improve access to equity and R&D financing, strengthen ties to larger markets, and address labor shortages through upskilling and an open labor market. The ongoing revision of the Vocational Training Act is a welcome step, reinforcing Switzerland’s strength in workforce development and skills adaptation in a changing economy.

The conclusion of negotiations with the EU resulted in a broad package of sectoral agreements aimed at stabilizing and developing bilateral relations. These agreements—covering areas such as electricity, food safety, and participation in EU programs—will require ratification by both sides, for which the necessary procedures have been launched. Continued engagement with the EU and other partners remains important to reduce uncertainty, safeguard access to critical markets, and strengthen resilience in the face of rising geo-economic fragmentation.

*   *   *   *   *

The IMF team thanks the Swiss authorities and other stakeholders for their hospitality, engaging discussions, and productive collaboration. We are especially grateful to the SNB and the State Secretariat for International Finance for assistance with arrangements.

https://www.imf.org/en/News/Articles/2025/06/30/07012025-mcs-switzerland-imf-concluding-statement-2025-art-iv-consultation-mission

MIL OSI