Fiscal efforts over the last five years have stabilized the average government debt-to-GDP ratio, albeit at a high level. Immediate pressures on public finances have eased with lower interest rates, but historically high debt ratios and a vacillating recovery, combined with looming pension and health costs, keep risks elevated.
Job creation is at the top of political agendas across the globe. In advanced economies, the employment losses generated by the crisis have been only partially reversed, raising concerns about permanent skills and human capital erosion associated with long-term unemployment and inactivity. In most emerging and low-income developing economies, while crisis-related job losses were relatively contained and largely temporary (Figure 2.1), informality remains high, and job creation insufficient to absorb the large number of young people entering the labor market. Global unemployment exceeds 200 million people, and an additional 13 million people are expected to be unemployed by 2018 (ILO, 2014).
It would seem unlikely that in order to provide this new facility for its members the Fund would have found it necessary to split itself into two Departments and to require each member to make a contribution equal to its quota, with one fourth normally payable in SDRs and the remainder in the member’s own currency.12 Rather, the following approach would have seemed natural.
In the aftermath of the revolution of 2011, Libya faces the complex task of rebuilding its economy, infrastructure, and institutions, and responding to the demands of the population, especially for improved governance. The conflict that accompanied the revolution had a severe impact on the economy, and international financial institutions have responded to the request of the Libyan authorities to provide policy consultations and technical assistantce to help maintain macroeconomic stability. Libya's National Transitional Council (NTC) has taken steps to promote a peaceful political transition, normalize economic conditions, and set out a national reform agenda. In the short term, the authorities must restore security, bring hydrocarbon production fully online, exercise fiscal discipline, resuscitate the banking system, and maintain macroeconomic stability. Medium-term efforts should focus on capacity building, infrastructure renewal, private-sector development, improving education, job creation, and putting in place an effective social safety net, within a framework of transparent and accountable governance. This paper discusses the risks to economic recovery and measures to promote economic diversification and employment growth.
If the credit activities of the Fund were run on an SDR basis, the present separation of the two Departments would no longer be necessary, or indeed convenient. In a unified Fund all members that extended credit through the Fund, even if they did not participate in the SDR allocation facility, would have to hold SDRs. That, however, would be predominantly a formal change. All members are now obliged to make their currencies available for sale; hence all members must stand ready, when their reserve and payments position permits, to acquire creditor positions in the Fund. Such positions are denominated in SDRs. Thus, in an economic sense, members are already bound to acquire SDRs.
The global economy remains fragile at this time. While the recovery in advanced economies is softening, many emerging market and developing economies have experienced a significant economic slowdown, and some large countries show signs of distress. Global risk aversion has risen, and commodity prices have continued to fall since the April 2015 Fiscal Monitor. The weaker outlook and concerns about the ability of policymakers to provide an adequate and swift policy response have amplified downward risks and clouded global prospects. According to this issue of the Fiscal Monitor, the challenging environment calls for a comprehensive policy response to boost growth and reduce vulnerabilities. In particular, it is critical to identify policies that could lift productivity growth by promoting innovation. Fiscal policy can play an important role in stimulating innovation through its effects on research and development, entrepreneurship, and technology transfer.
At a time when job creation tops the policy agenda globally, this issue of the Fiscal Monitor explores if and how fiscal policy can do more for jobs. It finds that while fiscal policy cannot substitute for comprehensive reforms, it can support job creation in a number of ways. First, deficit reduction can be designed and timed to minimize negative effects on employment. Second, fiscal policy can facilitate structural reforms in the labor market by offsetting their potential short term costs. And third, targeted fiscal measures, including labor tax cuts, can help tackle challenges in specific segments of the labor market, such as youth and older workers.
This issue of the Fiscal Monitor examines the conduct of fiscal policy under the uncertainty caused by dependence on natural resource revenues. It draws on extensive past research on the behavior of commodity prices and their implications for macroeconomic outcomes, as well as on extensive IMF technical assistance to resource-rich economies seeking to improve their management of natural resource wealth.
Following the oil price rises of late 1973 and early 1974, several organizations predicted massive accumulations of international reserves by the major oil exporting countries by the end of 1980. 1 In the event, their balance of payments surpluses on current account and their reserve accumulations have been substantially lower than expected. 2 One reason is that world economic growth has been slower than assumed. But almost certainly the major source of error concerned the absorptive capacity of the oil exporting nations. The speed with which highly ambitious development strategies could be formulated and implemented in the oil exporting countries during the period after 1973 was not anticipated by many commentators in the early days of the oil crisis. Largely as a result of these factors, the balance of payments surplus on current account of the major oil exporting countries 3 declined from $68 billion in 1974 to $35 billion in 1977; and it has been projected to decline further, to around $10 billion in 1978.4 Further, this surplus is now concentrated among five countries of relatively low absorptive capacity—Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, and the Socialist People’s Libyan Arab Jamahiriya. The current account position of the other seven oil exporting countries as a group was expected to move into deficit in 1978.
Since 1972 the major oil exporting countries have absorbed an unprecedented volume of resources. Initially, high government expenditures occurred, accompanied by accelerating expansion of domestic liquidity and inflation. Conditions eased after 1975, as domestic spending slowed and supply bottlenecks lessened. This article discusses the role and effectiveness of fiscal policy, particularly in the successful efforts to stabilize the domestic economy. The conditions for effective fiscal policy in oil exporting countries are not directly affected by the revenue effects of the latest round of oil price rises.