Marco A Espinosa-Vega, Ms. Kazuko Shirono, Mr. Hector Carcel Villanova, Miss Esha Chhabra, Ms. Bidisha Das, and Ms. Yingjie Fan
This departmental paper marks the 10th anniversary of the IMF Financial Access Survey (FAS). It offers a retrospective of the FAS database, along with some reflections as to its future directions.
Since its 2009 launch, the FAS has provided granular data on access to and use of financial services. It is a supply-side database with annual global coverage based on data sourced directly from financial service providers—aimed at supporting policymakers to target and evaluate financial inclusion policies. Its data collection has kept pace with financial innovation, such as the rise of mobile money and growing demand for gender-disaggregated data—and the FAS must continue to evolve.
A big challenge for the economic development of small island countries is dealing with external shocks. The Pacific Islands are vulnerable to natural disasters, climate change, commodity price changes, and uncertain donor grants. The question that arises is how should small developing countries formulate a fiscal policy to achieve economic stability and fiscal sustainability when prone to various shocks? We study how natural disasters affect long-term debt dynamics and propose fiscal policy rules that could help insulate the economy from such unexpected shocks. We propose fiscal rules to address these shocks and uncertainties using the example of Papua New Guinea. Our study finds the advantages of expenditure rules, especially a recurrent expenditure rule based on non-resource and non-grant revenue, interdependently determined by government debt and budget balance targets with expected disaster shocks. This paper contributes to the literature and policy dialogue by theoretically analyzing the impact of natural disasters on debt sustainability and proposing fiscal rules against natural disasters and climate changes. Our fiscal policy framework is practically applicable for many developing countries facing increasing frequency and impact of natural disasters and climate change. Our rules-based fiscal framework is crucial for sustainable and countercyclical macroeconomic policies to build resilience against devastating natural hazards.
Hidetaka Nishizawa, Mr. Scott Roger, and Huan Zhang
Pacific island countries (PICs) are vulnerable severe natural disasters, especially cyclones, inflicting large losses on their economies. In the aftermath of disasters, PIC governments face revenue losses and spending pressures to address post-disaster relief and recovery efforts. This paper estimates the effects of severe natural disasters on fiscal revenues and expenditure in PICs. These are combined with information on the frequency of large disasters to calculate the rate of budgetary savings needed to build appropriate fiscal buffers. Fiscal buffers provide self-insurance against natural disaster shocks and facilitate quick disbursement for recovery and relief efforts, and protection of spending on essential services and infrastructure. The estimates can provide a benchmark for policymakers, and should be adjusted to take into account other sources of financing, as well as budget risks from less severe as well as more frequent disasters.
International Monetary Fund. Strategy, Policy, &, Review Department, International Monetary Fund. Western Hemisphere Dept., and International Monetary Fund. Asia and Pacific Dept
This paper discusses how countries vulnerable to natural disasters can reduce the associated human and economic cost. Building on earlier work by IMF staff, the paper views disaster risk management through the lens of a three-pillar strategy for building structural, financial, and post-disaster (including social) resilience. A coherent disaster resilience strategy, based on a diagnostic of risks and cost-effective responses, can provide a road map for how to tackle disaster related vulnerabilities. It can also help mobilize much-needed support from the international community.
International Monetary Fund. Asia and Pacific Dept
This Article IV Consultation highlights that the economy is recovering well from several natural disasters, supported by accommodative fiscal and monetary policies. Growth performance picked up in recent years with improved political stability, though average growth rates were still lower than in other emerging and developing countries. Fiscal buffers have been used and external conditions, including oil prices and growth prospects of main trading partners, are becoming less favorable. Improving the overall business environment and governance is expected to raise potential growth by mobilizing private investment, enhancing productivity, and diversifying the economy. An improvement in the overall business environment is essential to achieve the ambitious growth targets laid out in the National Development Plan. Streamlining procedures to do business, accelerating the activation of the credit reporting agency, and reducing tax compliance costs has been recommended.
International Monetary Fund. Asia and Pacific Dept
Growth has been strong in recent years and some moderation is expected, with risks skewed to the downside. High fishing revenues improved the fiscal position, but generated pressure to increase spending. There has been progress on fiscal and structural reforms. Yet, public spending needs are large, driven by an infrastructure gap and climate adaptation costs, and the country remains at high risk of debt distress.
Pacific island countries are exposed to significant risks from natural disasters. As a
disaster relief measure, Fiji allowed pre-retirement pension withdrawls in the wake of
Cyclone Winston in 2016. Motivated by this policy action, we provide a normative
analysis of the use of early pension withdrawals after disasters, by setting up a life-cycle
saving model with myopic households facing large natural disaster shocks. The model
demonstrates the key trade-off between building up sufficient retirement savings and
ensuring the access to savings against natural disaster shocks, and sheds light on welfare
implications of early pension withdrawals.