Financial Crime World

San Marino Faces Fiscal Challenges Amidst Economic Recovery

Washington D.C. - International Monetary Fund (IMF) Report Highlights Challenges Ahead

The International Monetary Fund (IMF) has issued a report highlighting the challenges facing San Marino’s economy, despite its strong recovery from the COVID-19 pandemic.

Public Debt Expected to Peak This Year

According to the report, San Marino’s public debt is expected to peak this year and moderately decline thereafter, but remains vulnerable to potential shocks. The country’s interest payments are expected to remain manageable, but the size of its Eurobond and short 3-year maturity imply that gross financing needs will jump to a daunting 24 percent of GDP in 2024.

Urgent Need for Reform

To address these challenges, the IMF is urging San Marino to implement a comprehensive reform strategy that:

  • Reinforces recent gains in fiscal and financial sector liquidity
  • Implements an ambitious structural fiscal reform agenda
  • Completes the transformation of its banking sector

Strengthening Fiscal Position

The report also highlights the need for San Marino to strengthen its fiscal position by:

  • Withdrawing COVID-19 support measures
  • Implementing a combined consolidation of its central government balance and pension fund
  • Introducing a Value Added Tax (VAT)
  • Improving revenue collection and public spending efficiency

Addressing Non-Performing Loans and Banking System Strengthening

The IMF is also calling on San Marino to:

  • Tackle its large amount of Non-Performing Loans (NPLs) by following the European Central Bank’s time-bound guidelines and establishing an asset management company
  • Strengthen its banking system by:
    • Increasing liquidity requirements
    • Improving underwriting standards

Conclusion

The report concludes that San Marino has come through a unique shock and now needs to address long-standing challenges to secure sustainable growth in the future. “An ambitious plan to improve the business climate, consisting of digitalization, streamlining bureaucracy, while advancing further integration with the EU, is being developed,” said an IMF spokesperson. “These reforms will support the domestic economy and allow San Marino to become more attractive vis-a-vis foreign investors.”

Contact

  • Meera Louis
  • IMF Communications Department
  • Phone: +1 202 623-7100
  • Email: MEDIA@IMF.org