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Ms. Claudia H Dziobek, Mr. Alberto F Jimenez de Lucio, and Mr. James A Chan
This note addresses the following main issues: • Statistical definitions of government (Government Finance Statistics Manual 2001) • Institutional structure of government and public sector • What is a precise definition of government and why it is relevant • Potential pitfalls of lacking a precise definition of government • Definitions of government in IMF-supported programs • Applications for fiscal rules and other fiscal policy design
International Monetary Fund
Low-income countries (LICs) face significant challenges in meeting their development objectives, while maintaining a sustainable debt position. To address this dilemma, the international community has largely advocated recourse to concessional external finance. The Fund’s existing policy and practice on external debt limits conforms to this preference.
International Monetary Fund
This Selected Issues paper for Romania reports that the practice of nonpayment and arrears accumulation has been widespread in Romania. Managers of enterprises that remain in the pipeline for privatization for long periods of time have little incentive to reduce arrears. The state contributed to growth of arrears by accepting nonmonetary tax and utility payments, using tax offsets in procurement, and tolerating payment arrears. These practices have been prevalent at all levels of state and local government, as well as state utility companies.
Ms. Zuzana Brixiova
This paper examines how the on-the-job search of workers in the state sector who are seeking jobs in the private sector affects private sector employment, the unemployment level, and the unemployment duration in the transition economies of Central and Eastern Europe. The main finding is that on-the-job searching can account for the coexistence of a quickly growing private sector and a high unemployment level of long duration. The paper also addresses the issue of the optimal (output maximizing) rate of state sector closure and finds that the rate is slower when workers are simultaneously job hunting than when they are not.
Mr. George A Mackenzie and Mr. Peter Stella

Abstract

Central banks and other public financial institutions act as agents of fiscal policy in many countries. Their "quasi-fiscal" operations and activities can affect the overall public sector balance without affecting the budget deficit as conventionally measured, may also have important allocative effects, and increase the effective size of the public sector. This paper analyzes the macroeconomic and financial effects of such quasi-fiscal activities, as well as the taxes, subsidies, and other expenditures that such activities introduce outside the budget. Measurement and accounting issues are addressed, and policy recommendations are offered.

Mr. Aasim M. Husain and Ms. Ratna Sahay
Although a centerpiece of the reform process in Central and Eastern Europe, large-scale privatization cannot be undertaken all at once and policymakers inevitably face the choice of privatizing some sectors before others. This paper analyzes the allocative efficiency implications of alternate sequences of privatization in a reforming planned economy with two sectors—an input-producing upstream sector and a final goods-producing downstream sector. The model focuses on the link, through a market for intermediate inputs, between the two sectors. The impact of exogenous shocks to the two sectors are highlighted to show how the inflexibility of public firms in responding to shocks constrains the production response of private firms operating in perfectly as well as imperfectly competitive markets.