Key developments and challenges

To increase competitiveness and growth in the private sector, government intervention needs to be reduced. Policy challenges include reducing discriminatory barriers against imports, liberalising state procurement prices in agriculture and implementing privatisation in a transparent manner.

The banking sector has been strengthened through measures on capital requirements for new commercial banks, capital replenishment of state-owned banks and the unification of reserve requirements on foreign and local currency deposits. However, further reforms are needed to reduce the dominance of state-owned banks and the amount of direct lending.

Though the anti-crisis stimulus package has been successful, the focus on maintaining real exchange rate stability has contributed to an increased wedge between the official and black market rate, increasing the costs for importers and adding to a greater currency risk for all traders. Providing equal and ready access to foreign currency to the private sector remains a crucial policy challenge.