Before preparing a financial program or analyzing developments in a country, sufficient data on the economy’s past and expected performance are necessary. If the basis for the program or analysis is deficient, the program will probably not be well prepared and the objectives will not be achieved. All those data that may have an impact on the preparation of a program are needed. IMF missions are sometimes described as “hungry” for both statistics and data in general, but this hunger is logical, because before giving any advice or taking any decision, the mission must know what is happening in a country. The term “data” is used broadly here, meaning not only statistical information, but also details of pertinent legislation and of rules and regulations connected with the implementation of such legislation.
International Monetary Fund. External Relations Dept.
Over the past 15 years, Chile’s economic reforms and prudent mac-roeconomic policies have delivered strong growth and low inflation. Per capita income has tripled in U.S. dollar terms, and poverty has been cut by two-thirds to 13 percent. Growth has slowed in recent years from its breakneck pace in the mid-1990s but continues on a 5 percent trend.
IN CONSIDERING CRITERIA for a tax system in a developing country the response of tax revenue to changes in income has often been singled out as a vital ingredient.1 This response is measured by the concepts of tax elasticity and tax buoyancy, the former measuring in some sense the automatic response of revenue to income changes (i.e., revenue increase, excluding the effects of discretionary changes), and the latter measuring the total response of tax revenue to changes in income. A high tax elasticity is said to be a particularly desirable attribute, as it allows growth in expenditure, preferably related to development, to be financed by rising tax revenue without the need for politically difficult decisions to raise taxes. However, in fact, major sources of government revenue may have a low elasticity, in which case the authorities must seek additional revenue by introducing discretionary changes. Then, growth in tax revenue may come about through a high buoyancy 2—including growth through discretionary changes—as opposed to the natural growth through elasticity. Using Paraguay as an example, this paper analyzes the growth of tax revenues over the 1962-70 period—an era of conscious tax reform—by examining two major questions: (1) what was the elasticity of the system and its components, and how is the size of the elasticity coefficient explained? and (2) what was the buoyancy of the system relative to its elasticity? With respect to individual taxes, where were the major differences between buoyancy and elasticity found? These latter questions point to the effect of discretionary changes.
The desk economist can be defined as the IMF’s expert, in the broadest possible meaning of the term, on a certain country. This means that he should be fully knowledgeable about the economic and financial developments, as well as the political and social situation of his assigned country.1 Indeed, if the desk economist wishes to contribute to the shaping of the IMF’s policies on his country and have his views taken into account, he should know that country in every detail.
In using a country’s economic and financial data, whether to analyze economic developments in the country or to prepare a stabilization program, one must be aware of the quality and especially the deficiencies of the statistics at one’s disposal.
The Paraguayan authorities have prepared an economic program to stabilize their macroeconomic situation and begin a process of structural reform. Fiscal adjustment and structural reforms should pave the way for more rapid growth over the medium term. Despite these expected improvements in economic policies and performance, Paraguay remains vulnerable to external shocks. The fiscal situation has deteriorated sharply in recent years. Severe financing constraints have produced sizable public sector payments arrears. On the revenue side, the government's fiscal strategy is to raise revenues while minimizing increases in tax rates.
Raising growth on a sustainable basis and addressing widespread poverty are the main challenges for Paraguay. The macroeconomic program for 2007 aims at raising growth and reducing inflation. IMF staff recommends that the next Article IV Consultation continues within the 24-month cycle, and supports completion of the second and third Stand-by Arrangement (SBA) reviews. After the 2002 financial crisis, growth has rebounded to almost twice its long-term average, per capita income surged to its highest level in 8 years, and extreme poverty has been reduced by almost one third.
Adverse terms-of-trade developments and an unfavorable external environment have contributed to Paraguay's lackluster economic performance. Executive Directors observed the fiscal slippages, weaknesses in national accounts calculations, the statistical coverage of public enterprise operations and external tariffs, and stressed the need to tighten monetary and fiscal stances, and accelerate structural reforms. They welcomed the new strategy under the staff-monitored program, the improvement in the balance of payments, money, the central government's finances, and the country's progress toward meeting the General Data Dissemination Standard.