THE USE of advance import deposits as a means of implementing economic policy has spread rapidly in recent years. Most frequently used in Latin America, this technique has been applied in more than 20 countries in various parts of the world.1 The experience gained in recent years makes it possible now to analyze and to assess their functions as part of a general system of exchange and trade restrictions, and their contribution to the achievement of monetary stability.
International Monetary Fund. External Relations Dept.
This paper highlights that 1976 was an important year for the IMF. With the end of 1976, the IMF closed its books on a year of virtually unprecedented activity. It launched the New Year with a US$3.9 billion stand-by arrangement for the United Kingdom, the largest ever made for a member country. The outlook at the beginning of 1977 suggests another busy year ahead for the IMF. The proposed second amendment to the IMF’s Articles of Agreement and the increase in members’ quotas are expected to go into effect before the end of the year.
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.
After five years of Paraguay’s high growth led, in part by agro-exporting sectors, the external environment has turned less favorable, with a sharp decline of export prices and a curtailment of external credit lines. The Selected Issues paper for Paraguay discusses economic development and policies. Over the same period, inflation remained above 5 percent, but hovered around 10 percent in the last two years, fed in part by supply shocks but possibly also by an overheating of the economy.
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.
This 2002 Article IV Consultation highlights that Paraguay’s economic performance in recent years has been characterized by slow economic growth and increasing unemployment and poverty rates. This stagnation reflects structural impediments to growth, exacerbated by external and domestic shocks. In 2002, the economy fell into its worst recession in decades, with real GDP down by 2½ percent, according to official estimates, or 4½ percent, according to IMF staff estimates, while inflation accelerated to 14½ percent. The public finances also deteriorated sharply in 2002.
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.