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Ms. Prachi Mishra and Mr. Peter J Montiel
This paper surveys the evidence on the effectiveness of monetary transmission in low-income countries. It is hard to come away from this review with much confidence in the strength of monetary transmission in such countries. We distinguish between the "facts on the ground" and "methodological deficiencies" interpretations of the absence of evidence for strong monetary transmission. We suspect that "facts on the ground" are an important part of the story. If this conjecture is correct, the stabilization challenge in developing countries is acute indeed, and identifying the means of enhancing the effectiveness of monetary policy in such countries is an important challenge.
Mr. Noriaki Kinoshita and Mr. Cameron McLoughlin
The degree of an economy’s monetization, which has an important implication on economic growth, can be affected by the conduct of monetary policy, financial sector reform, and episodes of financial crises. The paper finds that monetization--measured by the ratio of broad money to nominal GDP-- in low- to middle-income countries is significantly correlated with per-capita GDP, real interest rates, and financial sector reform. It suggests that maintaining an upward momentum in monetization can be an important policy objective, particularly for low-income countries, and that monetary and financial sector policies need to be conducive to enhancing monetization.
Mr. Jeffrey M. Davis, Mr. Thomas J Richardson, Mr. Rolando Ossowski, and Mr. Steven A Barnett

Abstract

Privatization has been a key element of structural reform in many developing and transition economies during the last decade. This paper examines the fiscal and macroeconomic issues involved in the privatization of nonfinancial public enterprises in these economies. It considers issues such as the factors determining the proceeds from privatization and the amount accruing to the budget, the uses of proceeds, the impact of privatization on the budget and macroeconomic aggregates, and the privatization component of IMF-supported programs. The empirical evidence draws on case study countries that reflect geographical diversity and are representative of a range of privatization experience in developing and transition economies.

Mr. Saleh M. Nsouli and Justin B. Zulu

Abstract

This paper reviews recent experience of African countries in the design and implementation of adjustment programs supported by use of Fund resources.

Mr. Saleh M. Nsouli and Justin B. Zulu

Abstract

This paper reviews recent experience of African countries in the design and implementation of adjustment programs supported by use of Fund resources.1 The aggregate analysis covers primarily 1980 and 1981, while the case studies include results through the end of 1983. The paper is divided into seven parts. The first part outlines the economic background leading to the emergence or aggravation of financial imbalances in Africa before 1980. The second part reviews the role of the Fund in financing and adjustment. The third part examines the objectives of programs supported by use of Fund resources. Against this background, the fourth part analyzes the design of programs. The fifth part assesses the experience in implementing adjustment programs, with a view to determining the reasons for the difficulties that these countries encountered. The sixth part provides case studies of the recent adjustment programs of Somalia and Mali, which were supported by use of Fund resources. The conclusion summarizes the study’s main findings.

Mr. Jeffrey M. Davis, Mr. Thomas J Richardson, Mr. Rolando Ossowski, and Mr. Steven A Barnett

Abstract

Privatization has been a key element of structural reform in many developing and transition economies during the last decade. Governments undertaking privatization have pursued a variety of objectives: achieving gains in economic efficiency, given the extensive prevalence of poor economic performance of public enterprises in many countries and limited success with their reform; and improving the fiscal position, particularly in cases where governments have been unwilling or unable to continue to finance deficits in the public enterprise sector. In addition, liquidity-constrained governments facing fiscal pressures have sometimes privatized with a view to financing fiscal deficits with the proceeds. Other objectives have included the development of domestic capital markets.

Mr. Jeffrey M. Davis, Mr. Thomas J Richardson, Mr. Rolando Ossowski, and Mr. Steven A Barnett

Abstract

This section presents data on the scale of gross privatization proceeds and the amounts accruing to the budget for the case study countries. It then considers the factors affecting budgetary proceeds and their treatment in the fiscal accounts.

Mr. Saleh M. Nsouli and Justin B. Zulu

Abstract

In view of mounting economic and financial imbalances, a number of African countries worked closely with the Fund to design and carry out appropriate adjustment programs during 1980–81.2 At the beginning of 1980 there were 12 stand-by arrangements. The total amount approved under these arrangements was equivalent to SDR 455.2 million. Several arrangements expired and new arrangements were approved during 1980. At the beginning of 1981 there were 11 stand-by and 3 extended arrangements for a total of SDR 1.8 billion. With the increase in extended arrangements and the approval of new stand-by arrangements in 1981, the numbers of stand-by and extended arrangements in effect at the end of 1981 were 13 and 6, respectively, with the total amount committed reaching a record SDR 4.3 billion. Purchases nearly doubled in 1980 and more than doubled in 1981, reaching a record SDR 1.7 billion (Tables 2 and 3).

Mr. Saleh M. Nsouli and Justin B. Zulu

Abstract

The general objectives of adjustment programs supported by use of Fund resources are summarized in the Fund’s Articles of Agreement. These objectives include:

Mr. Jeffrey M. Davis, Mr. Thomas J Richardson, Mr. Rolando Ossowski, and Mr. Steven A Barnett

Abstract

The appropriate size of the fiscal deficit is largely determined by the overall macroeconomic objectives and fiscal sustainability. Viewed as a source of financing, akin to a bond sale, the amount of privatization proceeds generally should not itself determine the size of the deficit, and, moreover, the macroeconomic consequences are also similar to conventional bond financing. Nonetheless, privatization proceeds are distinct in certain ways. First, privatization may impact government net worth, which in turn has consequences for fiscal sustainability. Second, the privatization program might pose specific risks to macroeconomic stability—partly due to the size, lumpiness, and uncertain timing of privatization receipts—that enhance the need for monetary and fiscal policy coordination. And third, the discrete nature of privatization proceeds leads to questions regarding their appropriate use.

Mr. Jeffrey M. Davis, Mr. Thomas J Richardson, Mr. Rolando Ossowski, and Mr. Steven A Barnett

Abstract

The fiscal impact of privatization will reflect the amount and use of the proceeds and the subsequent changes in financial flows—taxes, transfers, and dividends—to and from the budget.18 In a broader context, consideration should also be given to the impact of privatization on quasi-fiscal costs, including subsidized credit to public enterprises. There may also be impacts on the budget from the assumption of quasi-fiscal costs that were previously imposed on public enterprises by the government arising from the pursuit of public policies, such as uncompensated provision of subsidized goods and services. Privatization often takes place as part of a policy package that involves a substantial change in the macroeconomic environment, which makes it difficult to distinguish its impact from the other effects of a regime change. Moreover, data on public enterprise operations is often scanty, and the information available on the financial flows between enterprises and the government, including quasi-fiscal flows, is less than complete.19

Mr. Saleh M. Nsouli and Justin B. Zulu

Abstract

Although there is general agreement on the objectives, each program is designed differently. There is no such thing as a “typical” Fund-supported adjustment program, although many articles have been written attempting to describe such programs by pointing out the commonality of objectives and instruments. The objectives and instruments, however, are limited and are clearly common to most countries. A program involves setting specific quantitative objectives and selecting the proper mix of instruments as well as deciding the degree to which each instrument will be used. In this sense, because no two countries share the same economic conditions, no two Fund-supported programs are alike. Each program addresses the specific problems of the country concerned, takes into account the macroeconomic relationships imposed by the institutional framework, and sets the quantitative targets for the instruments selected.

Mr. Jeffrey M. Davis, Mr. Thomas J Richardson, Mr. Rolando Ossowski, and Mr. Steven A Barnett

Abstract

This section examines evidence of the impact of privatization on growth, aggregate investment, and labor markets and unemployment. The micro-economic evidence in each area is first summarized, then followed by econometric results from the case study countries. The measured impact of privatization on macroeconomic performance should be interpreted with caution, given the association of privatization with a broader regime change.

Mr. Saleh M. Nsouli and Justin B. Zulu

Abstract

Performance under programs is difficult to assess insofar as the assessment depends on the yardstick selected. Guitián (1981) discusses the problem in detail, focusing on three yardsticks: (1) the performance that would have been achieved without a program; (2) the performance in the previous year or series of previous years; and (3) the targets of the programs.