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Eugene A. Birnbaum and Moeen A. Qureshi

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.

Charles Y. Mansfield

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.

International Monetary Fund. Fiscal Affairs Dept.
This Technical Assistance Report discusses measures to establish a structural balance rule and a public debt objective in Paraguay. The analysis suggests that the authorities’ structural balance formula should be more conservative and—to mitigate the risk of unwarranted expenditure growth—should assume that future structural revenues will grow at the same pace as trend GDP. Under this assumption, the structural balance rule is broadly equivalent to an expenditure rule, constraining spending to grow at trend GDP—a formula that is simpler to implement and easier to communicate to the public. Moreover, the formula should account for new revenue measures more explicitly, provided there are safeguards to ensure that they are estimated fairly.
Sara Kane

A $10 billion three-year Stand-By Arrangement for Indonesia was approved by the IMF’s Executive Board on November 5 [for complete text of Press Release, see pages 354–56]. The financing provided by the IMF will be supported by substantial funding from the World Bank and the Asian Development Bank and other lenders; the total amount of the first line of financial assistance to Indonesia, including the use of part of Indonesia’s own external assets, will be on the order of $23 billion. In addition, a number of other economies—including Australia, China, Hong Kong Special Administrative Region, Japan, Malaysia, Singapore, and the United States—have indicated that, if necessary, they would consider making available supplemental financing to support Indonesia’s program with the IMF.

International Monetary Fund. External Relations Dept.

Teresa Ter-Minassian, an Italian national, has been the Director of the IMF’s Fiscal Affairs Department since January 2001. She joined the IMF’s staff in 1971 as an Economist in the Fiscal Affairs Department, returning to serve as Deputy Director in 1988. Before taking on her present position, she held various senior positions in the IMF’s former European Department and, most recently, in the Western Hemisphere Department, where she served as Deputy Director from 1997. Ter-Minassian spoke recently with the IMF Survey about the work of the department and the new directions it is pursuing in line with the evolving mandate of the IMF.

Donald J. Pryor

This paper analyzes the impact of economic development on the environment. The paper highlights that the environmental impact of the industrial process includes everything from the effects of withdrawing the inputs for industry from nature, through the effects of transforming the inputs into salable products, the effects of using the products, and the effects of disposing of what remains after the product no longer has an economic use. The heart of the problem is that almost none of these impacts of industrial processes can readily be costed.

International Monetary Fund. External Relations Dept.

This paper examines the impact of the World Bank on the financial markets and developing countries. The sound financial structure of the Bank rests on its conservative loan-to-capital ratio. Its large liquidity is an assurance to investors in Bank bonds that their investments are assured of liquidity in case the need arises. To cope with their payments difficulties, the heavily indebted developing countries have adopted more cautious fiscal and monetary policies, limited wage increases, and reduced domestic consumption and investment.

International Monetary Fund. External Relations Dept.

Two IMF conferences aimed to promote the exchange of ideas and experience on both sides of the sovereign balance sheet among officials from emerging and mature market countries and private-sector representatives.