International Monetary Fund. Strategy, Policy, & Review Department, International Monetary Fund. Finance Dept., and International Monetary Fund. Legal Dept.
To help support members faced with the COVID-19 pandemic, the Fund temporarily increased certain access limits to its emergency financing (EF) instruments, i.e., Rapid Credit Facility (RCF) and Rapid Financing Instrument (RFI). While this expanded support has been critical to help countries manage the pandemic, the increase in access limits was not applied to the Large Natural Disasters (LND) windows within the EF toolkit, reducing the flexibility to respond to such LNDs. This paper proposes to temporarily increase by 50 percent of quota the annual access limit (AAL) and cumulative access limit (CAL) under the LND windows of the RCF and RFI. The changes to the “LND windows” would be in effect through end-December 2021, in line with the other temporary changes of access limits under EF instruments. The case for further extensions to all the temporarily increased EF AALs and CALs will be examined after the 2021 Annual Meetings.
Using a panel of 101 low- and middle-income countries with data covering the period 1980-2012, this paper applies various econometric approaches that deal with endogeneity issues to assess the impact of food price shocks on socio-political instability once fiscal policy and remittances have been accounted for. It focuses on import prices to reflect the vulnerability of importer countries / net-buyer households to food price shocks. The paper finds that import food price shocks strongly increase the likelihood of socio-political instability. This effect is greater in countries with lower levels of private credit and income per capita. On the other hand, while remittances seem to dampen the adverse effect of import food price shocks on socio-political instability in almost all countries, the mitigating role of fiscal policy is significant only in countries with low-levels of private credit.
This Selected Issues paper discusses reforms that could generate higher revenues from the non-oil sector through measures to rationalize the tax code, broaden the tax base, and increase administrative efficiency. These efforts should be complemented by economic diversification policies that support non-oil growth and thereby expand the potential tax base. The paper also reflects on lessons learned from other country experiences that could be relevant for the Republic of Congo. The authorities should step up revenue mobilization as a key component of their medium-term fiscal strategy. This will require a well-sequenced structure of reforms that includes three key elements. First, the newly created Tax Policy Unit in the Ministry of Finance should reduce institutional fragmentation and facilitate the design, coordination and implementation of a medium-term revenue strategy. Second, the government should urgently address the erosion of the tax base generated by an excessive and discretionary use of tax exemptions that do not comply with existing laws and regulations. Finally, the government should continue to focus on rationalizing the tax code, and increasing administrative efficiency to recover tax arrears, including through the modernization of existing income tax systems.