WASHINGTON, USA – A staff team from the International Monetary Fund (IMF) visited Managua during November 3-14 for the 2025 Article IV Consultation. The team met with Central Bank president Ovidio Reyes, finance minister Oscar Mojica Aguirre, other senior officials, and representatives from the private sector and the international community.
Economic activity remains resilient supported by sound macroeconomic policies, amid a shifting global policy landscape. Real gross domestic product (GDP) grew by 3.9 percent in the first half of 2025, as exports increased strongly despite global trade policy uncertainty, buoyed by external demand and favourable terms of trade. Remittances growth remained significant, as migrants increased their transfers to Nicaragua due to tightening immigration policies in the US. These developments continued to support a strong current account surplus. Reserves coverage remains ample and adequate; gross international reserves reached US$7.5 billion (7.9 months of imports) in September 2025. Inflation remains low, the fiscal position is strong, the central government deposits are substantial, and the financial sector is reportedly well capitalized with adequate liquidity and low non-performing loans.
In staff’s baseline scenario, a mild moderation in real GDP growth is expected in 2026. Growth is projected to moderate to 3.4 percent in 2026, from 3.8 percent in 2025, reflecting staff’s assumptions of lower remittances and exports, in a context of 18 percent US tariffs, global trade uncertainty, and the termination of the parole and temporary protected status programs for Nicaraguan migrants in the US. Over the medium term, staff expect real GDP growth to stabilise at around 3.4 percent, supported by public investment and an expanding labor force. Foreign reserves are expected to remain ample, albeit growing at a slower pace as current account surpluses narrow.
Risks to the outlook are on the downside, and there is high uncertainty. Downside risks stem from possibly weaker global growth and worse terms of trade relative to the baseline scenario, natural disasters, and stricter and broader international sanctions. Upside short-term risks include more favourable terms of trade, including a change in global tariffs, and higher public investment. However, there is high uncertainty regarding additional trade actions recommended by the US trade representative for Nicaragua, with decisions expected at the earliest by end-2025, which could impair firms’ exports and overall economic activity.
The mission welcomes the authorities’ continued commitment to safeguarding fiscal sustainability and building buffers while supporting growth. According to staff’s estimates, the 2026 draft budget would be consistent with a projected surplus of 1.5 percent of GDP, compared with 2.2 percent of GDP projected for 2025. The mission broadly supports the 2026 fiscal stance, as well as the draft budget’s prioritisation of public investment and social spending. At the same time, staff advise remaining fiscally prudent, in light of downside risks, exceptionally high uncertainty, limited external financing, and persistent imbalances in the pension system. In addition, the mission recommends enhancing tax collection and better targeting state-owned enterprises (SOE)transfers. In a downside scenario, targeted and time-bound support to vulnerable groups could be deployed, helping smooth the impact of temporary shocks.
Monetary policy should continue preserving price and external stability and the Central Bank of Nicaragua (BCN) should continue strengthening monetary policy transmission. The ongoing easing of the monetary policy stance and the announced rate of crawl of 0 percent for 2026 are appropriate given cyclical conditions, prudent fiscal policy, and credit tightening, as banks adjust their portfolios to meet increased capital requirements. The BCN smoothly fostered a higher use of local currency, and efforts are needed to continue with this policy and deepen capital markets to enhance monetary policy effectiveness. In a downside scenario, the authorities should stand ready to increase the monetary reference rate and recalibrate the rate of crawl, if needed.
Implementation of the recent changes in the financial legal framework would strengthen the system’s stability and resilience, and efforts are needed to further strengthen crisis preparedness. The mission supports the implementation of the comprehensive set of financial laws approved in early 2025, as many changes are broadly in line with international standards and largely incorporate staff’s previous recommendations, including enhancing macro-prudential oversight and reforming the deposit insurance.
The new laws also increased capital buffers and strengthened the recovery and crisis resolution framework. Further efforts are needed to prepare the analysis needed for activating counter-cyclical capital buffers (CCBs) and contingency plans in the crisis resolution framework. The mission also recommends standing ready to release CCBs in a downside scenario of financial distress. In addition, the mission recommends further adjusting the financial regulations to ensure they do not impose an excessive regulatory burden.
Sustaining higher medium-term growth will require boosting human and physical capital and diversifying exports. While returning migrants are expected to expand the labor force, realising growth gains will depend on skills development and integrating workers and firms into the formal economy. Stronger social safety nets and expanded active labour-market policies would also support a higher contribution of labor to medium-term growth. Public investment in transport, health and education infrastructure is welcome and should continue. The mission also welcomes efforts to expand export markets, by helping firms comply with norms to access those new markets and recommends working with export firms to support the skills needed to scale up into higher value-added products.
Sustaining higher medium-term growth also requires strengthening the business climate and significantly improving the rule of law. It is important to strengthen the business facilitation with economic agents to improve competitiveness and private investment, by reducing the cost of doing business. It is important to maintain fiscal integrity by ensuring tax administrative appeal processes are timely and consistent with published guidelines. It is also crucial to increase the transparency and effectiveness of administrative and judicial processes related to property rights (including of third parties), which includes guaranteeing all adequate legal recourse.
Efforts to strengthen economic governance, especially the anti-corruption framework, should continue. Progress in implementing the 2021 Safeguards Assessment recommendations to reinforce BCN’s autonomy and balance sheet should be sustained, alongside developing a strategy to transition to the International Financial Reporting Standards. Fiscal transparency has improved with expanding SOE coverage in published monthly reports, and further efforts should focus on publishing consolidated financial statements and audit reports.
The authorities are preparing for the Group of Financial Action for Latin America (GAFILAT)’s Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) evaluation. Coordination with private and not-for-profit organizations should be expanded for better understanding of risks, and gold sector agents should also report suspicious transactions, as needed. Efforts to digitize the asset declaration of public officials and audit public institutions should continue. The mission recommends further strengthening the anti-corruption framework by allowing the publication of asset declarations of top-level officials and ensuring effective management and oversight of all property of the state.
Data provided to the Fund remain broadly adequate for surveillance, but needs to be improved. With IMF support, the authorities are working to improve external statistics. The mission recommends expanding data sources, improving the timeliness of key statistics such as poverty rates, and enhancing the publication of the detailed balance of payments data, including remittances.
