Countries have made ample use of fiscal measures to protect lives and livelihoods against the health and economic fallout from the coronavirus disease 2019 (COVID-19) pandemic and to nurture the nascent reopening of economies in a highly uncertain environment. The drastic fiscal measures taken so far have been necessary, state-dependent, diverse, and costly. In general, these fiscal measures have mitigated the negative effects of the pandemic on health and economic outcomes. Although public debt levels are at record highs, further support is necessary to protect people who cannot make a living under the current circumstances and to promote a strong recovery. Fiscal policy should be tailored to different phases of the pandemic, adapting to evolving needs to protect people, support demand, facilitate the transformation to the post-pandemic economy, and ensure debt sustainability.
The immediate focus of governments during the COVID-19 crisis thus far has appropriately been to address the health emergency and provide lifelines for vulnerable households and businesses. Governments now also need to prepare economies for safe and successful reopening, foster recovery in employment and economic activity, and facilitate transformation to a post-pandemic economy that, with the right policies, can be more resilient, more inclusive, and greener. Public investment can make a crucial contribution toward these goals (see a discussion of the fiscal strategy for the recovery in Chapter 1 and Table 2.1).1 This chapter outlines how governments can undertake public investment in a timely manner while safeguarding quality, estimates the potential for public investment to create jobs and boost growth, and sets out priorities for the types of investment that will strengthen resilience and sustainability.
Chapter 1 of the report draws some early lessons from governments’ fiscal responses to the pandemic and provides a roadmap for the recovery. Governments’ measures to cushion the blow from the pandemic total a staggering $12 trillion globally. These lifelines and the worldwide recession have pushed global public debt to an all-time high. But governments should not withdraw lifelines too rapidly. Government support should shift gradually from protecting old jobs to getting people back to work and helping viable but still-vulnerable firms safely reopen. The fiscal measures for the recovery are an opportunity to make the economy more inclusive and greener. Chapter 2 of this report argues that governments need to scale up public investment to ensure successful reopening, boost growth, and prepare economies for the future. Low interest rates make borrowing to invest desirable. Countries that cannot access finance will, however, need to do more with less. The chapter explains how investment can be scaled up while preserving quality. Increasing public investment by 1 percent of GDP in advanced and emerging economies could create 7 million jobs directly, and more than 20 million jobs indirectly. Investments in healthcare, housing, digitalization, and the environment would lay the foundations for a more resilient and inclusive economy.
Many studies on international tax comparisons have been undertaken since the early 1970s.2 While controversial, such studies have facilitated more subtle comparisons of a country’s tax performance than would be afforded by focusing on its simple tax ratio. This paper provides a comparable framework for comparisons of both functional and economic expenditure patterns of countries having similar economic and demographic positions. It also provides an implicit technological norm for predicting the economic characteristics of a country’s expenditure pattern, based on its choice of priorities for functional expenditures.
With the steady increase in crude oil production and exports and the surge in oil prices in the mid-and late 1970s, Oman embarked upon an economic development path that transformed it into a prosperous country. Prudent utilization of oil revenues to develop social and physical infrastructure—with substantial investments undertaken in health, transportation, electric power, water supply, and communications—contributed to a rapid transformation of Oman’s economic foundation and structure. Today Oman boasts an impressive physical infrastructure, much improved socioeconomic conditions, and a high standard of living.
One can make hypotheses about the identity of the factors that are likely to influence spending in a given functional sector, and the significance of such factors can be empirically tested. Six groups of factors can be identified: (1) demographic influences, (2) sociological concerns, (3) the structure of the economy, (4) the level of economic development, (5) technological factors, and (6) environmental factors.
The economy of Oman experienced substantial growth and domestic price stability over the period 1980–97, during which the overall well-being of the population improved significantly. Liberal trade and payments systems and a stable currency supported this strong performance, notwithstanding marked fluctuations in world oil prices. The performance of the economy was not, however, associated with any significant shift in its structure. Dependence on the oil sector remains overwhelming, but the prospects for further growth of the oil sector have become limited. Moreover, the domestic saving-investment imbalance remained large during this period and contributed to a narrowing of the surplus in the external resource balance. Furthermore, as real economic growth has slowed in recent years and the population growth rate averaged about 2.85 percent a year over 1994—97, the annual increase in real GDP per capita during this period tended to remain subdued at only about 1 percent.
This section discusses the specification of the equations to predict the shares in GDP of each category of functional expenditure. The econometric results appear in Table 3. Table 1 shows the value of the IEC index. Table 4 ranks the countries by the value of their IEC index; a low ranking indicates a relatively low IEC index—namely, a low expenditure share relative to what would have been predicted for the country.
Oman, a member of the Cooperation Council of the Arab States of the Gulf (the Gulf Cooperation Council, or GCC),1 has an economic structure similar to that of the other GCC countries. All are oil-dependent, open economies with liberal exchange and trade systems and currencies that are effectively pegged to the U.S. dollar. Given their monocultural export orientation, these economies have been subject to similar impacts from changes in world oil prices; however, they vary in the extent of their dependence on known oil and natural gas resources. Oman’s dependence on the oil sector, as measured by the share of oil production in total GDP, government revenues, and export receipts, exceeds that of the GCC as a whole. That dependence, even when compared with the GCC average, has not changed significantly over the past six years(Figure 3.1.)
This paper presents the Completion Point Document for consideration of Rwanda’s Enhanced Initiative for Heavily Indebted Poor Countries. The government has maintained the policy of protecting social sector budget allocations from cuts during the course of the fiscal year, and military spending has progressively been reduced, which has also enabled a reallocation of resources to priority areas. Moreover, since the 2002 budget cycle, expenditures have been classified in all ministries according to programs and sub-programs, expected outputs, activities, and inputs.