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Ms. Mercedes Garcia-Escribano, Ms. Tewodaj Mogues, Marian Moszoro, and Mauricio Soto
South Asia has experienced significant progress in improving human and physical capital over the past few decades. Within the region, India has become a global economic powerhouse with enormous development potential ahead. To foster human and economic development, India has shown a strong commitment to the Sustainable Development Goals (SDG) Agenda. This paper focuses on the medium-term development challenges that South Asia, and in particular India, faces to ensure substantial progress along the SDGs by 2030. We estimate the additional spending needed in critical areas of human capital (health and education) and physical capital (water and sanitation, electricity, and roads). We document progress on these five sectors for India relative to other South Asian countries and discuss implications for policy and reform.
Ms. Mercedes Garcia-Escribano, Ms. Tewodaj Mogues, Marian Moszoro, and Mauricio Soto

. Roads Appendix Tables A1.1. India: Computation and Data Sources for Variables used in Health SDG Additional Spending Estimation A2.1. India: Computation and Data Sources for Variables Used in the Education SDG Additional Spending Estimation A3.1. India: Statistics of Coverage by Type of Water and Sanitation Service A4.1. India: Cost of Road Construction

Ms. Mercedes Garcia-Escribano, Ms. Tewodaj Mogues, Marian Moszoro, and Mauricio Soto

Highways (2019) . Note: Projections assume rural access increases to 90 percent. The estimated cost is a lower bound. First, India’s goal is to achieve 100 percent of households connected by all-weather roads under the Pradhan Mantri Gram Sadak Yojana (PMGSY) program by 2030 ( Government of India, NITI Aayog, 2018 ): i.e., the government’s goal is more ambitious than the target of 90 percent of the rural population with access, assumed in the IMF’s additional spending estimations for emerging market economies by Gaspar et al. (2019) . Second, our analysis does not

Mr. Serhan Cevik and John Ricco

estimations, we treat the dependent variable, real GDP per capita and consumer price inflation as endogenous and the terrorism indicator and other control variables as exogenous. In military spending estimations, we treat the dependent variable, real GDP per capita and trade openness as endogenous and the terrorism indicator and other control variables as exogenous. To avoid a proliferation of instruments, we collapse the instrument set as suggested by Roodman (2009) . We validate the system GMM identification assumptions by applying a second-order serial correlation test

Mr. Sanjeev Gupta, Michela Schena, and Mr. Seyed Reza Yousefi

of Implementing Expenditure Conditions by Category Note: IT, QPC, SB, and PA denote indicative target, quantitative performance criteria, structural benchmark, and prior action, respectively. III. Empirical Specifications and Main Findings We investigate the long-run and short-run impact of different types of IMF expenditure conditions on the components of public spending. Estimation techniques should be able to control for short term dynamics, endogeneity, sample selection bias, reverse causality, omitted common effects, and dependence of the error

Mr. Serhan Cevik and John Ricco
This paper provides an empirical analysis of how the frequency and severity of terrorism affect government revenue and expenditure during the period 1970–2013 using a panel dataset on 153 countries. We find that terrorism has only a marginal negative effect on tax revenue performance, after controlling for economic and institutional factors. This effect is also not robust to alternative specifications and empirical strategies. On the other hand, we find strong evidence that terrorism is associated with an increase in military spending as a percent of GDP (and a share of total government expenditure). Our estimations reveal that this impact is greater when terrorist attacks are frequent and result in a large number of fatalities. Empirical findings also support the view that public finances in developing and low-income countries are more vulnerable to terrorism than those in countries that are richer and diversified.
Mr. Sanjeev Gupta, Michela Schena, and Mr. Seyed Reza Yousefi
This paper studies the impact of expenditure conditionality in IMF programs on the composition of public spending. A granular dataset on different government expenditure conditions covering 115 countries for the 1992-2016 period is compiled. The results support the view that while conditionality on specific elements of spending could help achieve a program’s short-term objectives, it is structural conditionality which delivers lasting benefits. Structural public financial management conditionality (such as on budget execution and control) has proven to be effective in boosting the long-term level of education, health, and public investment expenditures. The results further indicate that conditionality on raising such spending may come at the expense of other expenditures. Finally, the successful implementation (and not mere existence) of the conditionality is crucial for improved outcomes. These findings are relevant for policy makers targeting achievement of the Sustainable Development Goals (SDGs).
Emilio Pineda, Mr. Paul Cashin, and Ms. Yan M Sun

restricted by the availability of external financing. In this context, FDI typically provides a more stable source of financing for current account imbalances. Higher FDI also tends to affect the current account balance through increased imports. The sign of the coefficient on FDI is likely to depend on the import content of FDI ( Rahman, 2008 ). Grants . In a similar fashion to FDI, grants typically offer a significant source of financing for tourism-dependent economies. The sign of the coefficient is again likely to depend on the import-content of grant spending

Emilio Pineda, Mr. Paul Cashin, and Ms. Yan M Sun
This paper uses three methods to assess movements of real exchange rates in the ECCU over time. First, the purchasing power parity hypothesis is tested and then used to provide a benchmark for equilibrium real exchange rates in the region. Second, a fundamentals-based equilibrium real exchange rate approach is used to explore sources of real exchange rate fluctuations in ECCU countries. And third, a macroeconomic balance approach is used to estimate equilibrium current account or current account "norms". The main finding of these analyses is that there is little evidence of overvaluation of the EC dollar. Furthermore, this paper contributes to the literature by analyzing the distinctive impact of tourism in determining real exchange rates through the wealth effect induced by tourism-driven increases in terms of trade and productivity.
Mr. Atish R. Ghosh, Mr. Jonathan David Ostry, and Miss Mahvash S Qureshi

, e, f Lebanon a, b Thailand a, b, c, e, f Czech Republic a, b, c, d, e Lithuania a, b, c, e, f Turkey a, b, c, d, e, f Dominican Republic b, c, e Macedonia, FYR a, b, c, e Ukraine a, b, c, f Ecuador a, b, c, e Malaysia a, b, c, d, e, Uruguay b, c, e, f Egypt, Arab Rep. a, b, c Mexico a, b, c, d, e, Venezuela b, c, e El Salvador b, e Morocco b, c, f Vietnam b Notes: a = Included in real government consumption spending estimations; b = Included in FX intervention