International Monetary Fund. Communications Department
This issue focuses on recent experiences that holds lessons for when to tackle debt and when not to. Growth is picking up, and the IMF has been ratcheting up its forecasts. Government coffers are filling and, with more people at work, demand for public social support is receding. Research shows that the stimulatory effect of fiscal expansion is weak when the economy is close to capacity. Low-income economies may be at greatest risk. Traditionally, they borrowed from official creditors at below-market rates. Higher global rates could divert precious budget resources to debt servicing from crucial infrastructure projects and social services. Raising budget balances toward their medium-term targets can be achieved at little cost to economic activity. Growth-enhancing infrastructure investments and crucial social services such as health and education should be maintained. Well-designed fiscal policy can address inequality and stimulate growth.
This 2011 Article IV Consultation reports that Fiji’s economic outlook appears stable, but there are downside risks related to the political situation, structural weaknesses, and the global environment. The 2012 budget has proposed much-needed fiscal consolidation, though marginal income tax rate reductions will make it difficult to achieve deficit targets. Monetary policy is accommodative, given the currently benign inflation outlook, but continued vigilance against future inflationary pressure is critical, and credit growth targets should be avoided.
International Monetary Fund. Asia and Pacific Dept
KEY ISSUESContext: With successful landmark elections in September 2014, Fiji took a decisive stride toward returning to democratic government for the first time since 2006. The successful elections are expected to solidify the recent improvements in relationships with traditional development partners, improve access to concessional development finance, and boost confidence in the economy. In terms of economic policy, the comfortable Parliamentary majority for the former interim Prime Minister�s party (FijiFirst) is expected to support continued economic reform momentum.Key issues and policy recommendations:� With the economy now growing above potential, near-term macroeconomic management needs to be carefully calibrated. The accommodative monetary policy in place since 2011 has stimulated economic activity. The Reserve Bank of Fiji should now tighten policy in order to moderate credit growth and curb excess liquidity.� Fiscal policy has been prudent and well focused in recent years, but the expansionary 2014 budget was a major departure from these welcome trends. Reversion to the prudent trend is strongly encouraged.� The authorities have accelerated economic reforms in recent years, for example in the sugar sector and pension schemes, but the key policy challenges remain to raise potential growth, reduce unemployment, improve financial inclusion, and increase resilience to shocks. Following the elections, continued structural reform momentum is needed to improve the business environment, address the infrastructure backlog, and raise the absorptive capacity to take full advantage of a potential increase in investments.
This technical note analyzes tax administration in small economies. Choosing the right organization structure is a key component of any program of tax administration reform and modernization. It creates a solid platform from which all other enhancements can follow. Organizations and agencies involved in providing advice to governments on modern tax administration have developed principles that should drive decisions on organization structure. This note describes the general principles of tax administration organization. Characteristics of tax administration in small and microeconomies are also elaborated.