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International Monetary Fund. Strategy, Policy, & Review Department
This paper presents traction as a multidimensional concept and discusses a comprehensive and complementary set of approaches to attempt to measure it based on the Fund’s value added to policy dialogue and formulation and public debate in member countries.
International Monetary Fund. Western Hemisphere Dept.
This Selected Issues explores ways for strengthening the current fiscal framework in Suriname and considers options for a new fiscal anchor. The paper provides an overview of mineral natural resources and their importance for the budget. It also lays out the current framework for fiscal planning and budget execution in Suriname and discusses the analytical underpinnings of modernizing it to make it more robust. The paper also presents estimates of long-term sustainability benchmarks based on the IMF’s policy toolkit for resource-rich developing countries. Suriname’s fiscal framework can be strengthened through a fiscal anchor rooted in the non-resource primary balance. Given the size of fiscal adjustment required to bring the non-resource primary balance in line with the long-term sustainability benchmark, a substantial transition period is needed to implement it. The IMF Staff’s adjustment scenario—designed to put public debt on the downward path—closes the current gap by less than half, implying that adjustment would need to continue beyond the 5-year horizon.
Federico Diaz Kalan, Ms. Adina Popescu, and Julien Reynaud
There is evidence that fiscal rules, in particular well-designed rules, are associated with lower sovereign spreads. However, the impact of noncompliance with fiscal rules on spreads has not been examined in the literature. This paper estimates the effect of the Excessive Deficit Procedure (EDP) on sovereign spreads of European Union member states. Based on a sample including the 28 European Union countries over the period 1999 to 2016, sovereign spreads of countries placed under an EDP are found to be on average higher compared to countries that are not under an EDP. The interpretation of this result is not straight-forward as different channels may be at play, in particular those related with the credibility and the design of the EU fiscal framework. The specification accounts for typical macroeconomic, fiscal, and financial determinants of sovereign spreads, the System Generalized Method of Moments estimator is used to control for endogeneity, and results are robust to a range of checks on variables and estimators.
International Monetary Fund
The 2012 Article IV Consultation on Mauritius reports that the outlook for growth and inflation is broadly positive, although growth is likely to slow somewhat to below 4 percent. The cyclical component of Mauritius’ fiscal balance is projected to be small. A less expansionary fiscal stance than currently projected by IMF staff would contribute to building policy buffers and reducing relatively high debt levels. In the event of a deterioration in the external environment, automatic stabilizers should be allowed to work, and limited fiscal stimulus could also be considered.
International Monetary Fund
Italy’s economic development after the recession is analyzed in this study. Earnings were hampered by low net interest and high loan-loss provisions, but banks remained profitable. A large and stable retail funding base and ample collateral to access eurosystem refinancing helped Italian banks to face liquidity and funding risks. The tax system was simplified to support growth and enhance tax compliance. The execution of fiscal federalism should not undermine fiscal discipline, and measures were taken to improve employment. Flexibility introduced by the labor market was welcomed.
International Monetary Fund
Jordan’s 2008 Article IV Consultation discusses the appropriate policy response to mounting fiscal and external vulnerabilities and higher inflation. Sharply higher world fuel and food prices led to a marked widening of the fiscal and external current account deficits and, more recently, a jump in inflation. Economic prospects remain broadly favorable, though the public and external sector imbalances imply increased challenges to sustaining strong macroeconomic performance. Structural reforms are proceeding, aimed at reducing distortions and enhancing the private sector’s growth prospects.
International Monetary Fund
The Swazi economy has continued to register sluggish economic activity even as rising Southern African Customs Union revenue contributed to a large fiscal surplus and accumulation of international reserves. The unchecked growth of insufficiently regulated saving and credit cooperatives poses risks to the financial system. Fiscal policy should safeguard priority spending and fiscal sustainability. Executive Directors commend the government’s effort in rebuilding international reserves. Further efforts are needed to improve the quality and timeliness of data to better facilitate policy formulation and monitoring.
Mr. Anthony M Annett, Mr. Jörg Decressin, and Mr. Michael Deppler
A rules-based fiscal framework, such as the EU’s Stability and Growth Pact (SGP), can be an important bulwark against short-sighted policies. Although policies have improved following the SGP’s adoption, shortcomings remain. These, however, are rooted in the policies rather than the rules, where few changes seem necessary. Specifically, the Excessive Deficit Procedure needs a stronger focus on policies rather than outcomes, while staying operationally simple and transparent. Furthermore, reforms are needed to foster time-consistent national policies, budgetary transparency, and ownership of the Pact. Accordingly, parliaments should debate national Stability Programs and national fiscal councils should review these programs for parliaments.
International Monetary Fund
This technical note focuses on recent developments to the Report on the Observance of Standards and Codes (ROSC) on Fiscal Transparency and Data Modules for Sweden. The authorities are implementing recommendations of the fiscal ROSC module. The government has decided to reform the state audit organization (RRV) as recommended by the report. Effective 2003, the RRV will be transformed from a government agency to an audit office under parliament, staffed by independent officials. The authorities are also following up on recommendations regarding data-related standards and codes.