Littérature scientifique sur le sujet « Local constitutionnal law »

The subject of scientific and theoretical analysis was the concept of local selfgovernment in the now widely discussed draft law on the organization of local self-government. Its comparison with the current version of the basic law on local self-government and the novelties of the 2020 Constitution of the Russian Federation revealed significant changes not in favor of the “updated model” (as the developers of the bill call it). The latter did not reflect the constitutional status of local self-government as an element of public authority. The legal construction proposed by the developers "self-organization of citizens", according to the author, deprives local self-government of power, and democracy as the basic principle of the constitutional system remains outside the new understanding of local self-government. Attention is also drawn to the inaccuracy of the definition of the goal-setting of local self-government, which deviates from the established constitutional terminology. The author formulated a definition of local self-government, emphasizing its role in the system of public authority, reflecting the modern constitutional model and preserving the basic values of the current law.

The Decicion of Constitutional Court concerning Berhala Island not a dispute of property belonging under civil law. This dispute are constitutionality of the law concerning establishsing a new local government to the UUD 1945. Under Decicion of Constitutional Court in case No. 32/PUU-X/2012 and No. 62/PUU-X/2012 judge of Constitutional Court interpretation law about establishsing a new local government not based on legal constitutionality of that law to the UUD 1945. The interpretation of judge of Constitutional Court based on recognition and respective to high court decicion in case judicial review about Berhala Island.

Objective: This article aims to review and analyze the constitutional foundations of local self-government within the context of modern society's legal framework. The primary objective is to determine the role and significance of constitutional norms in shaping the functioning of local self-government, and their broader impact on democracy and sustainable development. Methods: To achieve the research objectives, this study employed various research methods. Legal analysis was used to examine constitutional norms related to local self-government. Comparative analysis was conducted to study variations in constitutional provisions across different countries. Additionally, statistical data and scientific sources were analyzed to provide a comprehensive understanding of the subject matter. Systematic and logical analysis methods were applied to elucidate the interplay between constitutional norms and the practical implementation of local self-government. Results: The research results shed light on the importance of constitutional principles in shaping the landscape of local self-government. It highlights the impact of these norms on the functioning of local authorities and the rights and duties of citizens. The study also examines the commonalities and differences in constitutional provisions among countries governing local self-government and analyzes the practical implications of these provisions. Conclusions: Constitutional principles of local self-government play a crucial role in ensuring citizen participation, protecting the rights and responsibilities of local authorities, and strengthening democracy at the local level. The findings of this study underscore the significance of constitutional norms in shaping the landscape of local self-government and their wider ramifications for democracy and sustainable development. These insights can serve as a valuable resource for policymakers, public organizations, and researchers interested in local self-government and sustainable development issues, potentially guiding future legal reforms and political decisions. Future research opportunities may involve a more in-depth analysis of specific constitutional norms in different countries and an exploration of their impact on local politics and civil society.

Abstract The constitutional history thread woven through Faiz Ahmed's Afghanistan Rising: Islamic Law and Statecraft between the Ottoman and British Empires unites Afghan, Indian, Ottoman, Islamic, modernist, and other strands of analysis. Hanifi's essay addresses issues relevant to the comparative study of Afghanistan, namely, epistemology, class, culture, and empire. It explores how urban Persianate state elites in Kabul exploited imperial opportunities, especially educational opportunities, over the century since constitutional independence.

Hermeneutics, having emerged due to innovations in philosophy, is currently used by other humanities, including jurisprudence. Hermeneutics (from the Greek eppriveuco (hermeneutikos) - interpreter) - the art of understanding, comprehension, the doctrine of the interpretation of signs and understanding of meanings in the form of theory of the art of understanding, certain rules (methods, techniques) of interpretation, the art of their application, as well as the process of interpretation; organization, process and result of such correct reasoning, which actualizes various interpretive methodologies, adequate for understanding a text. Hermeneutic principles and approaches are harmoniously combined with centuries-old legal traditions - because the history of interpretation of legal texts dates back at least to the Renaissance, reflected in many schools (glossators, commentators (postglossators), etc.). The aim of the article is to demonstrate how the hermeneutics is used in the field of constitutional law based on the self-organized bodies of population's (SOBPs) materials and practice. The use of the term "self-government" is not entirely successful in the name "territorial public self-government bodies". After all, according to modern doctrinal concepts, one of the conditions for the formation of the rule of law in the country is the division of public power into public state and public municipal (self-governing) power. In this case, public state power is exercised by the relevant bodies, which, as a rule, belong to one of the branches of state power in accordance with the requirements of the concept of its division into legislative, executive and judicial. Municipal power is exercised by local governments. Based on this, both public authorities (local governments) and public municipal authorities (local governments) will function at the level of administrative-territorial units. According to the legislation of Ukraine, SOBPs are part of the system of local self-government, but are not bodies of local self-government. Thus, the use of the word "self-government" in the name of the SOBPs will indicate the system to which the house, street, etc. committees belong, but will be confusing because it will facilitate their identification with local governments. In addition, the use of the name "territorial public self-government" will characterize the nature of the dream bodies as mixed (public - public), which, in the author's opinion, is also not true.

With regard to access to land and forest resources, forestry legislation maintains an imbalance between the state, corporations, and local communities. Since the colonial era, forestry regulation has facilitated restrictions on the ability of local communities to benefit from land and forest resources, while also concentrating power in the hands of the state. To uphold state ownership, forestry law criminalizes customary practices, putting local communities at risk. In this sense, conflicts between local communities, corporations, and government agencies arise because of structural issues in the legal framework of laws and regulations that undermine the land rights of local communities. The establishment of the Constitutional Court in Indonesia in 2003 has enabled local communities and NGOs to challenge the Forestry Law. They use the Constitutional Court to support the resolution of forestry tenure conflicts. This article examines the extent to which the Constitutional Court can contribute to the resolution of forest tenure conflicts through judicial review of forest laws. This article discusses twelve Constitutional Court decisions regarding judicial review of the Forestry Law and the Law on Forest Destruction Prevention and Eradication. We found that the Constitutional Court has made a positive contribution to addressing the deficiency of forest legislation regarding local and customary land rights. The implementation of Constitutional Court’s ruling is not, however, a matter of self-implementation. The ruling of the Constitutional Court will only have significance if it is continuously promoted by various stakeholders in support of forest tenure reform to facilitate the resolution of forest tenure conflicts.

This research featured norms that provide an opportunity to redistribute matters of local significance from local government bodies to state authorities. The Federal Law on Organization of Local Governance (2014) provides an algorithm for this procedure. However, it has received poor scientific attention, as has the current law enforcement practice in the corresponding category of cases. The present analysis of the regional and court decisions shows that the state authorities tend to act chaotically in exercising their discretionary powers. Reauthorization has received no criteria of expediency and effectiveness so far. The examples from law enforcement practice are not in favor of local government and violate the constitutional principle of trust in the government (Constitution of the Russian Federation, Article 75.1). Reauthorization prevents local governments from long-term development strategizing of their municipalities. Both the laws of the subjects of the Russian Federation and the law enforcement practice show that reauthorization in its current form contradicts the constitutional principles of maintaining trust in the government, thus reducing the power of local governments.

Le quota est un instrument juridique courant en droit français. Le législateur en adopte dans différents secteurs, pour poursuivre des objectifs très variés : discrimination positive, protection de l'ordre public, préservation de l'environnement, protection de la santé publique, préservation des ressources halieutiques, contrôle des excédents agricoles. Le quota reste toutefois un instrument très controversé en droit public, notamment parce qu'il semble contrevenir au principe d'égalité. Les quotas féminins et les quotas ultras-marins illustrent de façon saisissante une forme d'allergie du droit français à certains types de quotas, objets de revendications politiques parfois anciennes. À partir des années 1980, les lois instaurant de tels quotas ont systématiquement été jugées inconstitutionnelles. Le Constituant a donc été amené à réviser, à quatre reprises en une seule décennie, la Constitution du 4 octobre 1958, afin d'habiliter le législateur à adopter de tels quotas.Les obstacles constitutionnels une fois levés, on aurait pu s'attendre à une prolifération des quotas naguère impossibles à établir. Mais tel n'a pas été le cas. D'une part parce que, à l'instar des autres quotas, l'adoption de quotas par sexe et ultras-marins relève de la compétence exclusive du législateur. D'autre part parce que, adoptés sur le fondement d'une habilitation constitutionnelle ad hoc, ils dérogent à certains principes constitutionnels, et font l'objet, à ce titre, d'un contrôle juridictionnel étroit. Pourquoi a-t-il fallu réviser la Constitution, qui plus est à quatre reprises, pour adopter des mécanismes si ordinaires du droit français ? Quelle est la portée exacte des nouvelles habilitations à instaurer des quotas ? Les quotas par sexe et ultras-marins sont-ils devenus des quotas comme les autres ? C'est notamment à ces questions que la recherche s'est efforcée de répondre. Elle met ainsi en lumière le rôle central de la figure du juge dans l'appréhension des quotas, et les insuffisances qui entourent encore aujourd'hui leur régime contentieux
Quota is an usual legal instrument in french law.The legislator adopts quotas in differents sectors, to pursue differents objectives : affirmative action, protection of the public order, environnemetal protection, public health protection, ... . However, quota is, in french public law, a controversial legal instrument, because it seems to be in opposition with the constitutionnal principle of equality.Gender quotas and ultramarine quotas illustrate in a striking manner this allergy of french public law towards quotas. Since the 80's the law wich introduce this type of quotas are systematically be declared inconstitutional.In order to empower the legislator to introduce these quotas, the constituent power has review the french Constitution four times.Since the revisions of the french Constitution these quotas are particularly framed by the judges. In one hand, as the other quotas, gender quotas an ultramrines quotas belong to the competence exclusive of the legislator. In the other hand, them depart from some constitutionnals principles, so they are strictly controled by the judges.Why has it been necessary to review four times the Constitution to introduce these usual legal instruments in french law ? What will be exactly the effect of these new habilitations ? Are Gender quotas and ultramarine quotas became like other quotas ? It is to these questions that the research has attempted to answer. It highlights the central role of the judges and the underdevelopment of their contentious system

La lecture de l’article 72 de la Constitution témoigne d’une organisation territoriale décentralisée reposant sur l’absence de hiérarchisation formelle des collectivités territoriales. La décentralisation française repose, d’une part, sur la reconnaissance d’une autonomie garantie aux collectivités territoriales, avec le principe de libre administration des collectivités territoriales et, d’autre part, sur un refus de hiérarchisation des collectivités territoriales qui se traduit notamment par le principe d’interdiction de tutelle entre collectivités territoriales. Pourtant, certaines collectivités territoriales apparaissent susceptibles de déterminer le contenu des décisions des autres collectivités territoriales. Pour dépasser ce paradoxe, notre thèse se propose d’interroger les rapports entre collectivités territoriales à travers le concept de domination. Une telle approche permet de constater que les rapports de domination entre collectivités territoriales sont consubstantiels à la décentralisation. Le premier temps de l’étude démontre que la domination entre collectivités territoriales est induite de la législation. En effet, le législateur organise par différents procédés une domination fonctionnelle des collectivités territoriales. La domination entre collectivités territoriales connaît aussi une forme spontanée qui se révèle permise par la loi. Or, cela n’apparaît finalement possible qu’en raison de la libre administration des collectivités territoriales. Le second temps de temps de l’étude révèle que la domination entre collectivités territoriales est induite de la libre administration des collectivités territoriales. L’étude du principe de libre administration permet de démontrer que son contenu influence de façon latente ce que peut être la domination entre collectivités territoriales. Les rapports de domination entre collectivités territoriales apparaissent alors comme une manifestation originale de la libre administration des collectivités territoriales
A reading of Article 72 of the French Constitution reveals a decentralized territorial organization based on the absence of a formal hierarchy of local authorities. French decentralization is based, on the one hand, on the recognition of a guaranteed autonomy for local authorities, with the principle of free administration of local authorities, and, on the other hand, on the rejection on the refusal to establish a hierarchy among local authorities, which is reflected, in particular, by the principe of the prohibition of supervision between local authorities. However, some local authorities appear likely to determine the content of the decisions of other local authorities. To overcome this paradox, our thesis aimes to examine relations between local authorities through the concept of domination. Such an approach reveals that relations of domination between local authorities are consubstantial with decentralization. The first part of the study demonstrates that domination between local authorities is induces by legislation. Indeed, throught various mechnisms, the legislator organizes the functional domination of local authorities. Domination between local authorities also takes a spontaneous form that is allowed by law. However, this is only possible because of the free administration of local authorities. The second part of the study reveals that domination between local authorities is induced by the free administration of local authorities. An examination of the principle of free administration demonstrates that its content latently influences what domination between local authorities can be. Thus, relations of domination between local authorities appear as an original manifestation of the free administration of local authorities

The political context that prompted the formation of district municipalities in the present form can be summarized as follows: before 1994, there were a few sporadic Regional Services Councils and Joint Services Boards responsible mainly for bulk service provision in rural areas. In many rural areas, the acute imbalances in personal wealth, physical infrastructure and the provision of services were most patent. Provinces decided which of the local government models best suited their province. Consequently, it was possible for the institutions of local government to differ from province to province and there would be a two-tier system of local councils and region-wide district councils throughout non-metropolitan South Africa. The aim of this study was two-fold. FIrst to analyze the key causes of conflict that arise within the two-tiered system. Second, to determine whether district intergovernmental forums will be able to address the key causes of conflict identifies and assist in making the relationship between district and local municipalities more co-operative.

This research project examines the consistency of Italian regional and local electoral systems with the Constitution. After a brief presentation of the international, European and constitutional norms regulating the right to vote, the thesis follows the evolution of the electoral laws of every level of government and the corresponding judicial decisions, both constitutional and not, which formed in the same years. It then analyzes thoroughly the electoral rules of the 19 Regions, 2 Autonomous Provinces, of the Provinces/Metropolitan Cities and of the Municipalities. The project assesses whether the standards provided by the Constitutional Court in relation to a particular level of government can be applied to other levels: in particular, the focus is on the interpretation of section 2, art. 48 Const. as applied to the national electoral law in the 1/14 and 35/17 decisions. After demonstrating that it would probably be appropriate to differentiate the application of the constitutional standards (more strictly to the Regions and less to the other entities), the thesis compares today’s laws with these standards. Finally, in order to allow a comparative analysis, the research project presents the German and Spanish systems of local electoral laws and its constitutional norms, from which it derives proposals to solve some of the long-lasting issues of the Italian local electoral system.

This study analyses the relationship between the chieftainship institution and the elected councils in Lesotho. Based on a qualitative case study method the study seeks to understand this relationship in four selected councils in the Maseru district and how this can be nurtured to achieve a consolidated democracy. Contrary to modernists‟ arguments (that indigenous African political institutions, of which the chieftainship is part, are incompatible with liberal democracy since they are, inter alia, hereditary, they compete with their elective counterparts for political power, they threaten the democratic consolidation process, and they are irrelevant to democratising African systems), this study finds that these arguments are misplaced. Instead, chieftainship is not incompatible with liberal democracy per se. It supports the democratisation process (if the governing parties pursue friendly and accommodative policies to it) but uses its political agency in reaction to the policies of ruling parties to protect its survival interests, whether or not this undermines democratic consolidation process. The chieftainship has also acted to defend democracy when the governing party abuses its political power to undermine democratic rule. It performs important functions in the country. Thus, it is still viewed by the country‟s political leadership, academics, civil society, and councillors as legitimate and highly relevant to the Lesotho‟s contemporary political system. Because of the inadequacies of the government policies and the ambiguous chieftainship-councils integration model, which tend to marginalise the chieftainship and threaten its survival, its relationship with the councils was initially characterised by conflict. However, this relationship has improved, due to the innovative actions taken not by the central government, but by the individual Councils and chiefs themselves, thus increasing the prospects for democratic consolidation. I argue for and recommend the adoption in Lesotho of appropriate variants of the mixed government model to integrate the chieftainship with the elected councils, based on the re-contextualised and re-territorialised conception and practice of democracy, which eschews its universalistic EuroAmerican version adopted by the LCD government, but recognises and preserves the chieftainship as an integral part of the Basotho society, the embodiment of its culture, history, national identity and nationhood.

This dissertation analyses the ability of Chinese lawyers to use administrative litigation to protect individuals and groups from an authoritarian state that frequently infringes on their rights. These plaintiffs fill administrative courts in China, opposing the overzealous tactics of police, challenging the expropriation of their land, and disputing the seizure and demolition of their homes. Empirically, it relies on several unique data sources in a mixed-methodological approach. Qualitative and small-n quantitative data from 126 interviews with a random sample of Chinese lawyers and 52 additional interviews are supplemented by documentary sources. These findings are then tested against official data and a large survey of Chinese lawyers. This research demonstrates that administrative litigation is part of a polycentric authoritarian system that helps the Chinese state to monitor its agents, allows limited political participation, and facilitates economic development (Chapter One). By giving ordinary Chinese a chance to hold their local governments accountable in court, administrative litigation represents a significant step towards rule of law, but its limited scope means that it has not been accompanied by dramatic liberalisation (Chapter Three). In part, this is because the most prolific and successful administrative litigators are politically embedded lawyers, insiders who challenge the state in court but eschew the most radical cases and tactics (Chapter Four). The tactics that allow politically embedded lawyers to successfully litigate administrative cases rely on and contribute to China’s polycentric authoritarianism by drawing in other state, quasi-state, and non-state actors (Chapter Five). Multinationals in China are largely failing to contribute to the development of China’s legal system because they readily accept preferential treatment from the Chinese state as an alternative to litigation (Chapter Six). While administrative litigation bolsters China’s polycentric authoritarianism in the short term, it offers tremendous potential for rationalisation, liberalisation, and even democratisation in the long term.

In the textbook, in accordance with the requirements of federal state educational standards, from the standpoint of the current state of constitutional law, the issues of the course of constitutional law of Russia, theory and practice of constitutional construction, constitutional and legal regulation of the structure of the state, the political system, society as a whole are systematically and fully disclosed. For students and teachers of educational institutions of secondary professional education of a legal profile, as well as employees of state and local self-government bodies and for all those interested in constitutional law issues.

In the textbook, in accordance with the requirements of the federal state educational standard of higher professional education of the third generation, from the standpoint of the current state of constitutional law, the issues of the course of constitutional law of Russia, the theory and practice of constitutional construction, constitutional and legal regulation of the structure of the state, the political system, society as a whole are systematically and fully disclosed. For university students studying in the direction of training 030900 " Jurisprudence "(qualification (degree)" bachelor"," master"), graduate students and teachers of law schools, employees of state authorities and local self-government, as well as for anyone interested in constitutional law.

The fifth, significantly revised edition of the textbook highlights the basic concepts and institutions of foreign constitutional law, reveals its subject, system, sources. The issues of the legal status of the individual, forms of the state, local self-government, etc. are comprehensively analyzed. In the interests of a more in-depth and integral, comprehensive understanding of the state system of the leading countries, the textbook includes chapters on the USA, Great Britain, France, Germany, Italy, Spain, the Nordic countries, Japan, China, India, the Arab states, the EAEU countries, Uzbekistan. Special chapters contain regional reviews of the main constitutional and legal institutions. For students, postgraduates and teachers of law schools and faculties.

The book covers the issues of Russian constitutional law, the formation and development of constitutional and legal institutions, and analyzes the problems of forming the constitutional and legal foundations of Russia's political development. The second volume of the publication deals with the issues of state structure, the electoral system, state power and local self-government in the Russian Federation. For students studying for a master's degree, as well as for students studying undergraduate and specialist programs, graduate students, law school teachers, and anyone interested in various aspects of Russian constitutionalism.

The relevance of the work lies in identifying current trends in strengthening civil initiative budgeting, public control over budgets and public finances to strengthen the principles of democracy and judicial protection at the constitutional level. The novelty lies in the assessment of the legal positions of society and the state regarding the value parameters of budgetary and constitutional provisions as mechanisms for protecting the rights of citizens in the public sector. The purpose of the article is to consider topical constitutional-legal and budgetary-legal problems of increasing the value of constitutional provisions as the basic principles of legal regulation of protecting the budgetary interests of the state and society. Special methods of legal and informational analysis have been used to study innovative approaches to protecting the budgetary provision of constitutional rights of citizens. The results of the study include a set of legal approaches to improve the level of budgetary protection of citizens and the state within the framework of constitutional democracy. They cover judicial review of budget disputes to protect the rights of citizens to compensation payments and social security supplements, increase budgetary activity at the local level through initiative budgeting. As part of the discussion, it is concluded that the model of budgetary control based on the results of budget execution should be consistent with the constitutional principles of budgetary federalism and democracy. The consequences of the conclusion state that the participation of citizens at the stages of the budgetary process of local self-government helps modeling and public monitoring of draft budgets, reduces the risks of misuse of budgets and increases control over the compliance of budget reporting with real results of economic activity.

The work analyzes the rights of future generations in a perspective of solidarity within Italian-European environmental law, in a similar way to what was done in the German legal system. The analysis is conducted through a survey of the Italian-European regulatory framework, also with specific reference to the objectives of European social policies and through the jurisprudential comparative analysis with the legal system of the Federal Republic of Germany. In particular, with specific reference to a recent environmental dispute brought before the German Constitutional Court (Case Neubauer, et all v. Germany), within which the rights of future generations to live in a healthy environment are recognized. In the aforementioned case, the complainants allege that the German government has not introduced a legal framework sufficient to reduce the emission of greenhouse gases and has not limited the increase in global temperature, according to the parameters agreed in the Paris Climate Agreement of 2015. The ruling of the German Constitutional Court is relevant since it considers it inadequate to achieve the objectives set by the international obligations on the reduction of greenhouse gas emissions assumed by the federal law on climate protection of 2019. The aforementioned law is considered partly unconstitutional because it does not sufficiently protect people from future violations and limitations of the rights of freedom following the gradual intensification of climate change. In particular, in a perspective of solidarity, in a not local but global conception of the environment, with the recognition of the progressive and dangerous climate change, the German Constitutional Court notes that the German legislator has not distributed the CO2 emission balance proportionally and therefore, an adequate distribution of the sacrifice among current and future generations. In particular, the German Court writes: "one generation must not be allowed to consume large portions of the CO2 balance by supporting a relatively smaller share of the reduction effort, if this would leave subsequent generations with a drastic reduction burden and expose their lives to serious losses of liberty". The European and sometimes national regulatory framework still appears to be unsatisfactory with respect to the sustainable development objectives. So, the task of the national courts is that, as in the case of the German Constitutional Court, to evaluate the national regulatory provisions on climate protection, in the light of the principle of solidarity towards future generations, adopting an environmental approach that is not limited in time and in space but global.

Local autonomy is a principle of organisation and operation of the public administration, mainly regulated at the constitutional level. It represents a supreme recognition of its indispensable character in the state’s legal, political, and administrative architecture. Thus, the development of the life of a community in the absence of bodies democratically elected directly by the citizens appears completely outside the possibility of a natural administrative life. From this perspective, our study presents a specific case in which a territorial administrative unit functioned for three years (and will continue, most likely until the end of the mandate) without a local Council – the body democratically elected by the citizens to regulate life at the level of the fortress. The presentation will go through all the legal stages of the situation, starting from the first meeting of the legally established Local Council, following the 2020 elections, and ending up to now. The analysis of the incident regulations and the monitoring of the actual situation will highlight the weakness of the law from the perspective of its concrete efficiency and the danger it can constitute for democracy. Moreover, we try to raise an alarm signal on some interpretations that can lead to the illusion of the lack of absolute necessity of such institutions, with the argument that it is possible to live without them; often, the economicfinancial factor (the costs of the elections) taking precedence over the democratic debate, especially for a young democracy that still has a long way to go before reaching democratic maturity.

This text is the result of a comparative research on local government in Brazil and Switzerland, with emphasis on the themes of creation and merger of municipalities and inter-municipal cooperation. The first chapter contains a theoretical study on the relationship between local government and federalism, as well as a brief analysis of the constitutional profile of municipalities in various countries. In the second and third chapters are explained profiles of municipalities respectively in Brazil and Switzerland. In the fourth chapter a comparison is made between these profiles, especially in the chosen subjects (merger and inter-municipal cooperation). In the conclusion, taking the precautions needed in any study of comparative law, are exposed some ideas for improvement of local government in both countries.

This publication pprovides an in-depth exploration of the challenges and barriers to accessing quality education in urban informal settlements of Nairobi. Based on extensive research, including interviews, focus groups and participatory methods involving local communities and stakeholders, the report highlights the significant gaps in educational infrastructure, teacher qualifications and equity in school access. Despite the Kenyan government's legal frameworks and policies to ensure education for all, the proliferation of private, low-cost schools and inadequate public school facilities have exacerbated inequalities. The publication calls for comprehensive strategies, including the construction of public schools, upgrading existing facilities, and ensuring quality and inclusivity in education, to address these issues and fulfill the constitutional right to education for every child.

Banco de la República is celebrating its 100th anniversary in 2023. This is a very significant anniversary and one that provides an opportunity to highlight the contribution the Bank has made to the country’s development. Its track record as guarantor of monetary stability has established it as the one independent state institution that generates the greatest confidence among Colombians due to its transparency, management capabilities, and effective compliance with the central banking and cultural responsibilities entrusted to it by the Constitution and the Law. On a date as important as this, the Board of Directors of Banco de la República (BDBR) pays tribute to the generations of governors and officers whose commitment and dedication have contributed to the growth of this institution.1 Banco de la República’s mandate was confirmed in the National Constitutional Assembly of 1991 where the citizens had the opportunity to elect the seventy people who would have the task of drafting a new constitution. The leaders of the three political movements with the most votes were elected as chairs to the Assembly, and this tripartite presidency reflected the plurality and the need for consensus among the different political groups to move the reform forward. Among the issues considered, the National Constitutional Assembly gave special importance to monetary stability. That is why they decided to include central banking and to provide Banco de la República with the necessary autonomy to use the instruments for which they are responsible without interference from other authorities. The constituent members understood that ensuring price stability is a state duty and that the entity responsible for this task must be enshrined in the Constitution and have the technical capability and institutional autonomy necessary to adopt the decisions they deem appropriate to achieve this fundamental objective in coordination with the general economic policy. In particular, Article 373 established that “the State, through Banco de la República, shall ensure the maintenance of the purchasing power of the currency,” a provision that coincided with the central banking system adopted by countries that have been successful in controlling inflation. In 1999, in Ruling 481, the Constitutional Court stated that “the duty to maintain the purchasing power of the currency applies to not only the monetary, credit, and exchange authority, i.e., the Board of Banco de la República, but also those who have responsibilities in the formulation and implementation of the general economic policy of the country” and that “the basic constitutional purpose of Banco de la República is the protection of a sound currency. However, this authority must take the other economic objectives of state intervention such as full employment into consideration in their decisions since these functions must be coordinated with the general economic policy.” The reforms to Banco de la República agreed upon in the Constitutional Assembly of 1991 and in Act 31/1992 can be summarized in the following aspects: i) the Bank was assigned a specific mandate: to maintain the purchasing power of the currency in coordination with the general economic policy; ii) the BDBR was designatedas the monetary, foreign exchange, and credit authority; iii) the Bank and its Board of Directors were granted a significant degree of independence from the government; iv) the Bank was prohibited from granting credit to the private sector except in the case of the financial sector; v) established that in order to grant credit to the government, the unanimous vote of its Board of Directors was required except in the case of open market transactions; vi) determined that the legislature may, in no case, order credit quotas in favor of the State or individuals; vii) Congress was appointed, on behalf of society, as the main addressee of the Bank’s reporting exercise; and viii) the responsibility for inspection, surveillance, and control over Banco de la República was delegated to the President of the Republic. The members of the National Constitutional Assembly clearly understood that the benefits of low and stable inflation extend to the whole of society and contribute mto the smooth functioning of the economic system. Among the most important of these is that low inflation promotes the efficient use of productive resources by allowing relative prices to better guide the allocation of resources since this promotes economic growth and increases the welfare of the population. Likewise, low inflation reduces uncertainty about the expected return on investment and future asset prices. This increases the confidence of economic agents, facilitates long-term financing, and stimulates investment. Since the low-income population is unable to protect itself from inflation by diversifying its assets, and a high proportion of its income is concentrated in the purchase of food and other basic goods that are generally the most affected by inflationary shocks, low inflation avoids arbitrary redistribution of income and wealth.2 Moreover, low inflation facilitates wage negotiations, creates a good labor climate, and reduces the volatility of employment levels. Finally, low inflation helps to make the tax system more transparent and equitable by avoiding the distortions that inflation introduces into the value of assets and income that make up the tax base. From the monetary authority’s point of view, one of the most relevant benefits of low inflation is the credibility that economic agents acquire in inflation targeting, which turns it into an effective nominal anchor on price levels. Upon receiving its mandate, and using its autonomy, Banco de la República began to announce specific annual inflation targets as of 1992. Although the proposed inflation targets were not met precisely during this first stage, a downward trend in inflation was achieved that took it from 32.4% in 1990 to 16.7% in 1998. At that time, the exchange rate was kept within a band. This limited the effectiveness of monetary policy, which simultaneously sought to meet an inflation target and an exchange rate target. The Asian crisis spread to emerging economies and significantly affected the Colombian economy. The exchange rate came under strong pressure to depreciate as access to foreign financing was cut off under conditions of a high foreign imbalance. This, together with the lack of exchange rate flexibility, prevented a countercyclical monetary policy and led to a 4.2% contraction in GDP that year. In this context of economic slowdown, annual inflation fell to 9.2% at the end of 1999, thus falling below the 15% target set for that year. This episode fully revealed how costly it could be, in terms of economic activity, to have inflation and exchange rate targets simultaneously. Towards the end of 1999, Banco de la República announced the adoption of a new monetary policy regime called the Inflation Targeting Plan. This regime, known internationally as ‘Inflation Targeting,’ has been gaining increasing acceptance in developed countries, having been adopted in 1991 by New Zealand, Canada, and England, among others, and has achieved significant advances in the management of inflation without incurring costs in terms of economic activity. In Latin America, Brazil and Chile also adopted it in 1999. In the case of Colombia, the last remaining requirement to be fulfilled in order to adopt said policy was exchange rate flexibility. This was realized around September 1999, when the BDBR decided to abandon the exchange-rate bands to allow the exchange rate to be freely determined in the market.Consistent with the constitutional mandate, the fundamental objective of this new policy approach was “the achievement of an inflation target that contributes to maintaining output growth around its potential.”3 This potential capacity was understood as the GDP growth that the economy can obtain if it fully utilizes its productive resources. To meet this objective, monetary policy must of necessity play a countercyclical role in the economy. This is because when economic activity is below its potential and there are idle resources, the monetary authority can reduce the interest rate in the absence of inflationary pressure to stimulate the economy and, when output exceeds its potential capacity, raise it. This policy principle, which is immersed in the models for guiding the monetary policy stance, makes the following two objectives fully compatible in the medium term: meeting the inflation target and achieving a level of economic activity that is consistent with its productive capacity. To achieve this purpose, the inflation targeting system uses the money market interest rate (at which the central bank supplies primary liquidity to commercial banks) as the primary policy instrument. This replaced the quantity of money as an intermediate monetary policy target that Banco de la República, like several other central banks, had used for a long time. In the case of Colombia, the objective of the new monetary policy approach implied, in practical terms, that the recovery of the economy after the 1999 contraction should be achieved while complying with the decreasing inflation targets established by the BDBR. The accomplishment of this purpose was remarkable. In the first half of the first decade of the 2000s, economic activity recovered significantly and reached a growth rate of 6.8% in 2006. Meanwhile, inflation gradually declined in line with inflation targets. That was how the inflation rate went from 9.2% in 1999 to 4.5% in 2006, thus meeting the inflation target established for that year while GDP reached its potential level. After this balance was achieved in 2006, inflation rebounded to 5.7% in 2007, above the 4.0% target for that year due to the fact that the 7.5% GDP growth exceeded the potential capacity of the economy.4 After proving the effectiveness of the inflation targeting system in its first years of operation, this policy regime continued to consolidate as the BDBR and the technical staff gained experience in its management and state-of-the-art economic models were incorporated to diagnose the present and future state of the economy and to assess the persistence of inflation deviations and expectations with respect to the inflation target. Beginning in 2010, the BDBR established the long-term 3.0% annual inflation target, which remains in effect today. Lower inflation has contributed to making the macroeconomic environment more stable, and this has favored sustained economic growth, financial stability, capital market development, and the functioning of payment systems. As a result, reductions in the inflationary risk premia and lower TES and credit interest rates were achieved. At the same time, the duration of public domestic debt increased significantly going from 2.27 years in December 2002 to 5.86 years in December 2022, and financial deepening, measured as the level of the portfolio as a percentage of GDP, went from around 20% in the mid-1990s to values above 45% in recent years in a healthy context for credit institutions.Having been granted autonomy by the Constitution to fulfill the mandate of preserving the purchasing power of the currency, the tangible achievements made by Banco de la República in managing inflation together with the significant benefits derived from the process of bringing inflation to its long-term target, make the BDBR’s current challenge to return inflation to the 3.0% target even more demanding and pressing. As is well known, starting in 2021, and especially in 2022, inflation in Colombia once again became a serious economic problem with high welfare costs. The inflationary phenomenon has not been exclusive to Colombia and many other developed and emerging countries have seen their inflation rates move away from the targets proposed by their central banks.5 The reasons for this phenomenon have been analyzed in recent Reports to Congress, and this new edition delves deeper into the subject with updated information. The solid institutional and technical base that supports the inflation targeting approach under which the monetary policy strategy operates gives the BDBR the necessary elements to face this difficult challenge with confidence. In this regard, the BDBR reiterated its commitment to the 3.0% inflation target in its November 25 communiqué and expects it to be reached by the end of 2024.6 Monetary policy will continue to focus on meeting this objective while ensuring the sustainability of economic activity, as mandated by the Constitution. Analyst surveys done in March showed a significant increase (from 32.3% in January to 48.5% in March) in the percentage of responses placing inflation expectations two years or more ahead in a range between 3.0% and 4.0%. This is a clear indication of the recovery of credibility in the medium-term inflation target and is consistent with the BDBR’s announcement made in November 2022. The moderation of the upward trend in inflation seen in January, and especially in February, will help to reinforce this revision of inflation expectations and will help to meet the proposed targets. After reaching 5.6% at the end of 2021, inflation maintained an upward trend throughout 2022 due to inflationary pressures from both external sources, associated with the aftermath of the pandemic and the consequences of the war in Ukraine, and domestic sources, resulting from: strengthening of local demand; price indexation processes stimulated by the increase in inflation expectations; the impact on food production caused by the mid-2021 strike; and the pass-through of depreciation to prices. The 10% increase in the minimum wage in 2021 and the 16% increase in 2022, both of which exceeded the actual inflation and the increase in productivity, accentuated the indexation processes by establishing a high nominal adjustment benchmark. Thus, total inflation went to 13.1% by the end of 2022. The annual change in food prices, which went from 17.2% to 27.8% between those two years, was the most influential factor in the surge in the Consumer Price Index (CPI). Another segment that contributed significantly to price increases was regulated products, which saw the annual change go from 7.1% in December 2021 to 11.8% by the end of 2022. The measure of core inflation excluding food and regulated items, in turn, went from 2.5% to 9.5% between the end of 2021 and the end of 2022. The substantial increase in core inflation shows that inflationary pressure has spread to most of the items in the household basket, which is characteristic of inflationary processes with generalized price indexation as is the case in Colombia. Monetary policy began to react early to this inflationary pressure. Thus, starting with its September 2021 session, the BDBR began a progressive change in the monetary policy stance moving away from the historical low of a 1.75% policy rate that had intended to stimulate the recovery of the economy. This adjustment process continued without interruption throughout 2022 and into the beginning of 2023 when the monetary policy rate reached 12.75% last January, thus accumulating an increase of 11 percentage points (pp). The public and the markets have been surprised that inflation continued to rise despite significant interest rate increases. However, as the BDBR has explained in its various communiqués, monetary policy works with a lag. Just as in 2022 economic activity recovered to a level above the pre-pandemic level, driven, along with other factors, by the monetary stimulus granted during the pandemic period and subsequent months, so too the effects of the current restrictive monetary policy will gradually take effect. This will allow us to expect the inflation rate to converge to 3.0% by the end of 2024 as is the BDBR’s purpose.Inflation results for January and February of this year showed declining marginal increases (13 bp and 3 bp respectively) compared to the change seen in December (59 bp). This suggests that a turning point in the inflation trend is approaching. In other Latin American countries such as Chile, Brazil, Perú, and Mexico, inflation has peaked and has begun to decline slowly, albeit with some ups and downs. It is to be expected that a similar process will take place in Colombia in the coming months. The expected decline in inflation in 2023 will be due, along with other factors, to lower cost pressure from abroad as a result of the gradual normalization of supply chains, the overcoming of supply shocks caused by the weather, and road blockades in previous years. This will be reflected in lower adjustments in food prices, as has already been seen in the first two months of the year and, of course, the lagged effect of monetary policy. The process of inflation convergence to the target will be gradual and will extend beyond 2023. This process will be facilitated if devaluation pressure is reversed. To this end, it is essential to continue consolidating fiscal sustainability and avoid messages on different public policy fronts that generate uncertainty and distrust. 1 This Report to Congress includes Box 1, which summarizes the trajectory of Banco de la República over the past 100 years. In addition, under the Bank’s auspices, several books that delve into various aspects of the history of this institution have been published in recent years. See, for example: Historia del Banco de la República 1923-2015; Tres banqueros centrales; Junta Directiva del Banco de la República: grandes episodios en 30 años de historia; Banco de la República: 90 años de la banca central en Colombia. 2 This is why lower inflation has been reflected in a reduction of income inequality as measured by the Gini coefficient that went from 58.7 in 1998 to 51.3 in the year prior to the pandemic. 3 See Gómez Javier, Uribe José Darío, Vargas Hernando (2002). “The Implementation of Inflation Targeting in Colombia”. Borradores de Economía, No. 202, March, available at: https://repositorio.banrep.gov.co/handle/20.500.12134/5220 4 See López-Enciso Enrique A.; Vargas-Herrera Hernando and Rodríguez-Niño Norberto (2016). “The inflation targeting strategy in Colombia. An historical view.” Borradores de Economía, No. 952. https://repositorio.banrep.gov.co/handle/20.500.12134/6263 5 According to the IMF, the percentage change in consumer prices between 2021 and 2022 went from 3.1% to 7.3% for advanced economies, and from 5.9% to 9.9% for emerging market and developing economies. 6 https://www.banrep.gov.co/es/noticias/junta-directiva-banco-republica-reitera-meta-inflacion-3

Protection systems in Central-Eastern Europe (CEE) are different from the Dutch system. They are older and initially, i.e., pre-World War II, were built to counter the threat of politically motivated violence. Post-1989, it changed to threats from organised crime, and since the 2010s, it is changing again towards countering politically motivated acts. Each of the three systems had its own turning points – be it 2010/2018 or 2024. These energised the systems and spurred them into action, but often this is happening in a “we should have seen it coming” fashion. The most obvious case of this is Slovakia in the aftermath of the assassination attempt on Prime Minister (PM) Robert Fico, with the head of Úrad pre ochranu ústavných činiteľov a diplomatických misií MV SR – (Ministry of Interior’s) Department for the protection of “constitutional authorities” and diplomatic missions (UOUC) now admitting they failed to imagine something like this happening and failed to train for this eventuality. This now leads to a hyperactive approach from the unit and the tightening of standards. Each system is seemingly available throughout the whole country and groups protected persons (PPs) into three categories: VIPs, witnesses and crown witnesses, and harmed or threatened persons. There is also the military option for the ministers of defence – these are protected by the military gendarmerie, and there have been instances of given ministers using such units too eagerly, while, for example, attending their sports facilities or even sending them to shop for them. Two of the three systems (Czech and Slovak) are run by the unified, hierarchical police forces. In Poland, there is also the SOP (Sluzba Ochrony Panstwa or State Protection Service), which protects VIPs. Nonetheless, the organisational flowcharts are very clear and similar across the three case studies. The first group of PPs is the most visible, with ample literature available on it. The second is surrounded by a proverbial wall of silence and for the right reasons. Indeed, recent literature coming out on the topic is sometimes written by the former crown witnesses who undermine the integrity of the system as they overstress the system’s shortcomings and failures. The third layer seems most neglected – some police forces almost habitually refuse to work on this layer of the protection system, others are more zealous in this regard. Herein, however, lies the biggest difference between the three case studies – the Slovak system encourages a victim to report a crime and the police will then go after the criminal, the Polish system has seen a boom in the number of “harmed/threatened persons,” the Czech system finds itself in between the two. The command and control of the systems is centralised and hierarchical and almost totally in the hands of the police – the only exception being the Polish VIP protection unit, SOP. Hardly any other institution features in the system at all, except the prosecutor’s office, if there is a complaint against a person allegedly being the source of a given threat, or the military police, if protection is about the Minister of Defence or the chief of the general staff. State resources are also used to protect the buildings and some of the personnel from “state assets,” i.e., nationalised companies running, for example, electricity, water, gas, etc. These develop their own protection services and obtain them using, effectively, state funds, but shop for these on the proverbial market. The systems have not undergone any devolution – even in the light of threats and attacks against local figures. One might be working with the local police or its elements to counter these locally, but the command and control is very much in the hands of, at least, regional commands of the police force and the proverbial buck always stops with the police president/police commander and, subsequently, the Minister of Interior and the Prime Minister. Moreover, if local figures are to be protected (as in the aftermath of the Adamowicz assassination in Poland), this is still ordered “from on high” and then sent down the chain of command. Again, one size fits all is more evident here with police units across the countries working from a centrally ordained script. Local variations are possible and available, but there is an attempt to synchronise options and protection packages. The police forces rely on tested modalities, but allow for a degree of flexibility, depending on the situation and the resources at hand in all three sub-elements of the systems. There is a tendency to start low and upgrade if need be – the case of Lucia Plavakova in Slovakia is telling in that regard. Police forces will not share the rules and regulations governing the packages offered to a given protected person. There is a tendency to legislate for each type of PPs separately and/or enshrine the regulations governing the protection systems in, for example, police bills. Police forces suffer from recruitment issues all around the region. Its protective departments belong to the most overworked, but this is also due to the fact that some have focused on recruiting members close to retirement and not individuals keen on moving up the proverbial ladder of a given police force. As a result of this, relatively few policemen want to join these and consequently, they are understaffed. More elite units within the protection systems, for example, focusing on the protection of crown witnesses or within regional commands and working towards the protection of harmed persons, remain relatively unknown, which prevents them from leaking information but also disrupts their recruitment efforts as fellow policemen often do not know about them or their work and are thus unlikely to join them.

This brief summarizes findings from a study undertaken by the Rights and Resources Initiative and McGill University to systematically analyze the carbon rights held by Indigenous Peoples, local communities, and Afro-descendant Peoples in 33 countries in Africa (11), Asia (9), and Latin America (13) that cover over 35% of the world’s forest. We examine whether and how countries protect the rights necessary for communities to manage, control, and benefit from carbon on their lands and to access compensation and justice when they are affected by carbon trading initiatives. We collected data on 35 indicators from domestic laws and policies related to land, carbon, and resource rights across several sectors, including constitutional law; land tenure administration; and forest, climate, and environmental law. Across these 33 countries, our analysis refers to the legal rules that govern 96 community-based tenure regimes (CBTRs) identified by RRI in these countries.

In the face of the multiple shocks currently experienced by the domestic economy (resulting from the drop in oil prices and the appearance of a global pandemic), the Colombian financial system is in a position of sound solvency and adequate liquidity. At the same time, credit quality has been recovering and the exposure of credit institutions to firms with currency mismatches has declined relative to previous episodes of sudden drops in oil prices. These trends are reflected in the recent fading of red and blue tonalities in the performance and credit risk segments of the risk heatmaps in Graphs A and B.1 Naturally, the sudden, unanticipated change in macroeconomic conditions has caused the appearance of vulnerabilities for short-term financial stability. These vulnerabilities require close and continuous monitoring on the part of economic authorities. The main vulnerability is the response of credit and credit risk to a potential, temporarily extreme macroeconomic situation in the context of: (i) recently increased exposure of some banks to household sector, and (ii) reductions in net interest income that have led to a decline in the profitability of the banking business in the recent past. Furthermore, as a consequence of greater uncertainty and risk aversion, occasional problems may arise in the distribution of liquidity between agents and financial markets. With regards to local markets, spikes have been registered in the volatility of public and private fixed income securities in recent weeks that are consistent with the behavior of the international markets and have had a significant impact on the liquidity of those instruments (red portions in the most recent past of some market risk items on the map in Graph A). In order to adopt a forward-looking approach to those vulnerabilities, this Report presents a stress test that evaluates the resilience of credit institutions in the event of a hypothetical scenario thatseeks to simulate an extreme version of current macroeconomic conditions. The scenario assumes a hypothetical negative growth that is temporarily strong but recovers going into the middle of the coming year and has extreme effects on credit quality. The results suggest that credit institutions have the ability to withstand a significant deterioration in economic conditions in the short term. Even though there could be a strong impact on credit, liquidity, and profitability under the scenario being considered, aggregate capital ratios would probably remain at above their regulatory limits over the horizon of a year. In this context, the recent measures taken by both Banco de la República and the Office of the Financial Superintendent of Colombia that are intended to help preserve the financial stability of the Colombian economy become highly relevant. In compliance with its constitutional objectives and in coordination with the financial system’s security network, Banco de la República will continue to closely monitor the outlook for financial stability at this juncture and will make the decisions that are necessary to ensure the proper functioning of the economy, facilitate the flow of sufficient credit and liquidity resources, and further the smooth functioning of the payment system. Juan José Echavarría Governor

Banco de la República’s main goal is to preserve the purchasing power of the currency in coordination with the general economic policy that is intended to stabilize output and employment at long-term sustainable levels. Properly meeting the goal assigned to the Bank by the 1991 Constitution critically depends on preserving financial stability. This is understood to be a general condition in which the financial system channels domestic savings and evaluates and manages the financial risks in a way that facilitates the performance of the economy and efficient allocation of resources while, at the same time, it is able to, on its own, absorb, dissipate, and mitigate the appearance of risks that may arise as a result of adverse events. Banco de la República’s Financial Stability Report provides a diagnosis of the financial system’s and its debtors’ recent performance and indicates the main risks and vulnerabilities that could have an effect on the stability of the Colombian economy. The objective is to share this information with the financial market participants and the public and encourage public debate on trends and risks that affect the system. The results presented here also serve the monetary authority as a basis for making decisions that will enhance financial stability. The analysis presented in this edition of the Report makes it possible to conclude that the Colombian financial system has liquidity and capital adequacy levels that are not only above those required by internationally accepted parameters but would even be sufficient to face the occurrence of extreme low-probability risks. In particular, during the last six months, the aggregate capital adequacy of credit institutions rose 22 basis points and reached 18.1% in February 2023. The liquidity coverage ratio indicator and the net stable funding ratio, in turn, were 202.0% and 111% and thus well above the regulatory minimums of 100%. The period of analysis in this Report includes the period of stress that occurred in the U.S. regional bank segment and at Credit Suisse and caused nervousness regarding possible risks to global financial stability. The characteristics and risks that generated problems in those entities are analyzed in this Report and the Colombian financial system is evaluated considering different sources of vulnerability. Some characteristics that protect the Colombian financial system are: (i) a cautious balance sheet structure on both the asset and liability sides of the entities; (ii) the widespread practice of valuing the investment portfolio at market prices, and (iii) the appropriate management of liquidity risk. In line with a higher interest-rate scenario and a slowdown in local economic activity, the credit growth rate has slowed down in recent months while there have been signs of deterioration in the loan portfolios. Credit, which had been exhibiting excessively high growth levels last year, especially in the consumer category, has slowed down while past-due and risky loans have rebounded. This is also driven mainly by the consumer portfolio which is reflecting the growth in risks assumed by financial institutions in previous quarters. In spite of the lower portfolio performance seen currently and projected for the future, the high level of household indebtedness in Colombia, especially in the consumer segment, continues to be considered a source of vulnerability for the Colombian financial system as was the case in the previous edition of this Report (see section 2.2.1). Nevertheless, the financial system continues to reflect soundness and stability: credit institutions (CIs) are keeping liquidity and capital adequacy indicators well above the minimums established by regulation while nonbanking financial institutions (NBFIs) have registered an increase in their profits.The adjustments in the monetary policy stance since September 2021, the effect of the macroprudential measures implemented by the Office of the Financial Superintendent of Colombia (FSC) at the end of last year associated with a higher requirement in terms of loan loss provisions, and stricter conditions in the allocation of loans by CIs are behind the projection of a loan portfolio growth rate that is likely to continue declining in the coming months. In compliance with its constitutional objectives and in coordination with the financial system’s security network, Banco de la República will continue to closely monitor the outlook for financial stability at this juncture and will make the decisions necessary to ensure the proper functioning of the economy, facilitate sustainable flows of sufficient credit and liquidity funds, and further the smooth functioning of the payment system.

The Colombian financial system has not suffered major structural disruptions during these months of deep economic contraction and has continued to carry out its basic functions as usual, thus facilitating the economy's response to extreme conditions. This is the result of the soundness of financial institutions at the beginning of the crisis, which was reflected in high liquidity and capital adequacy indicators as well as in the timely response of various authorities. Banco de la República lowered its policy interest rates 250 points to 1.75%, the lowest level since the creation of the new independent bank in 1991, and provided ample temporary and permanent liquidity in both pesos and foreign currency. The Office of the Financial Superintendent of Colombia, in turn, adopted prudential measures to facilitate changes in the conditions for loans in effect and temporary rules for rating and loan-loss provisions. Finally, the national government expanded the transfers as well as the guaranteed credit programs for the economy. The supply of real credit (i.e. discounting inflation) in the economy is 4% higher today than it was 12 months ago with especially marked growth in the housing (5.6%) and commercial (4.7%) loan portfolios (2.3% in consumer and -0.1% in microloans), but there have been significant changes over time. During the first few months of the quarantine, firms increased their demands for liquidity sharply while consumers reduced theirs. Since then, the growth of credit to firms has tended to slow down, while consumer and housing credit has grown. The financial system has responded satisfactorily to the changes in the respective demands of each group or sector and loans may grow at high rates in 2021 if GDP grows at rates close to 4.6% as the technical staff at the Bank expects; but the forecasts are highly uncertain. After the strict quarantine implemented by authorities in Colombia, the turmoil seen in March and early April, which was evident in the sudden reddening of macroeconomic variables on the risk heatmap in Graph A,[1] and the drop in crude oil and coal prices (note the high volatility registered in market risk for the region on Graph A) the local financial markets stabilized relatively quickly. Banco de la República’s credible and sustained policy response played a decisive role in this stabilization in terms of liquidity provision through a sharp expansion of repo operations (and changes in amounts, terms, counterparties, and eligible instruments), the purchases of public and private debt, and the reduction in bank reserve requirements. In this respect, there is now abundant aggregate liquidity and significant improvements in the liquidity position of investment funds. In this context, the main vulnerability factor for financial stability in the short term is still the high degree of uncertainty surrounding loan quality. First, the future trajectory of the number of people infected and deceased by the virus and the possible need for additional health measures is uncertain. For that reason, there is also uncertainty about the path for economic recovery in the short and medium term. Second, the degree to which the current shock will be reflected in loan quality once the risk materializes in banks’ financial statements is uncertain. For the time being, the credit risk heatmap (Graph B) indicates that non-performing and risky loans have not shown major deterioration, but past experience indicates that periods of sharp economic slowdown eventually tend to coincide with rises in non-performing loans: the calculations included in this report suggest that the impact of the recession on credit quality could be significant in the short term. This is particularly worrying since the profitability of credit establishments has been declining in recent months, and this could affect their ability to provide credit to the real sector of the economy. In order to adopt a forward-looking approach to this vulnerability, this Report presents several stress tests that evaluate the resilience of the liquidity and capital adequacy of credit institutions and investment funds in the event of a hypothetical scenario that seeks to simulate an extreme version of current macroeconomic conditions. The results suggest that even though there could be strong impacts on the credit institutions’ volume of credit and profitability under such scenarios, aggregate indicators of total and core capital adequacy will probably remain at levels that are above the regulatory limits over the horizon of a year. At the same time, the exercises highlight the high capacity of the system's liquidity to face adverse scenarios. In compliance with its constitutional objectives and in coordination with the financial system's security network, Banco de la República will continue to closely monitor the outlook for financial stability at this juncture and will make the decisions that are necessary to ensure the proper functioning of the economy, facilitate the flow of sufficient credit and liquidity resources, and further the smooth operation of the payment systems. Juan José Echavarría Governor