International Monetary Fund. Asia and Pacific Dept
This paper discusses Mongolia’s Request for Purchase Under the Rapid Financing Instrument (RFI). The coronavirus disease 2019 pandemic has taken a large toll on economic activity in Mongolia, giving rise to urgent budget and balance of payments needs. The authorities have already taken several measures to limit the economic contraction and help the most vulnerable. Recent revisions to the budget allow for higher health and social spending as well as tax relief to affected households and businesses. In addition, the Bank of Mongolia has eased monetary and financial policies to help prevent a disorderly contraction in bank lending to the private sector. Emergency financing under the IMF’s RFI will provide much needed support to respond to the urgent balance of payments and budgetary needs. Additional assistance from development partners will be required to support the authorities’ efforts and close the financing gap. The authorities’ commitment to high standards of transparency and governance in the management of financial assistance is welcome.
This Selected Issues paper on Estonia examines impact of assessing competitiveness and exposure to shocks integrating global value chains (GVCs). This paper strengthens the analytical underpinnings of competitiveness assessments and exposure to shocks by incorporating GVCs. Standard real effective exchange rates (REER) indexes assume trade is only in final goods. However, like most European economies, Estonia is highly integrated into GVCs. This implies that assessments of competitiveness should consider trade in value added. Based on a structural model, the paper assesses competitiveness and exposure to trade shocks accounting for the GVC participation in Estonia. The analysis using a REER index considering the GVC architecture suggests potential competitiveness problems in Estonia. The paper also estimates the impact of overvaluation (and appreciation) of the GVC related REER measure on value added export and real GDP growth and finds observable effects. Further, trade tension induced tariff hikes may have important costs for value added produced in Estonia.
International Monetary Fund. Middle East and Central Asia Dept.
This paper discusses Pakistan’s First Review Under the Extended Arrangement Under the Extended Fund Facility and Request for Modification of Performance Criteria. Pakistan’s program is on track and has started to bear fruit. However, risks remain elevated. Strong ownership and steadfast reform implementation are critical to entrench macroeconomic stability and support robust and balanced growth. The authorities are committed to sustaining the progress on fiscal adjustment to place debt on a downward path. The planned reforms include strengthening tax revenue mobilization, including the elimination of tax exemptions and loopholes, and prudent expenditure policies. Preparations for a comprehensive tax policy reform should start early to ensure timely implementation. The authorities have adopted a comprehensive plan to address the accumulation of arrears in the power sector. Its full implementation is key to improve collection, reduce losses, and enhance governance. Timely and regular adjustment of energy tariffs will bring the sector in line with cost recovery.