The International Monetary Fund Executive Board concluded the 2025 Article IV consultation with Nicaragua under its lapse-of-time procedure and endorsed the staff appraisal, with the authorities consenting to publication of the staff report. The assessment portrays an economy that has absorbed multiple shocks since 2018 and continues to benefit from low inflation, twin fiscal and external surpluses, a declining public debt-to-GDP ratio, well-capitalized banks and sizeable buffers, while operating under targeted international sanctions and amid transfers of private property to the state since 2022. Real GDP growth is projected at 3.8 percent in 2025 and 3.4 percent in 2026, with the short-term outlook broadly favorable but medium-term risks tilted to the downside amid high uncertainty. Policy advice centered on maintaining prudent fiscal, monetary and financial policies while building buffers and raising potential growth. On fiscal policy, staff broadly supported the 2026 capital and human development spending plans but urged cautious budget execution given downside risks, limited external financing and persistent pension system imbalances, alongside recommendations to enhance tax collection and better target state-owned enterprise transfers to create space for priority investment and targeted social spending. For monetary and exchange rate policy, the ongoing easing and the announced 0 percent crawl for 2026 were assessed as appropriate, while calling for stronger monetary transmission, greater local-currency use and deeper capital markets, with readiness to tighten and recalibrate the crawl if needed. In the financial sector, staff welcomed early-2025 financial laws that increased capital buffers and strengthened recovery and resolution frameworks, and urged further crisis preparedness including analysis for activating the countercyclical capital buffer and contingency planning, as well as additional governance, transparency, AML/CFT and data improvements to support investment and competitiveness.

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