Glossary
Author:
International Monetary Fund
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Language:
English
Keywords:
COVID-19; Delta variant; public finances; credibility; inclusive growth; global integration; government debt; fiscal rules; fiscal space; fiscal council; fiscal consolidation; economic stabilization; economic scarring; sustainability; Sustainable Development Goals; discretionary fiscal policy; Global
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Abstract

Chapter 1 argues that fiscal policy should remain nimble and strengthen its medium-term frameworks, as countries face highly uncertain and differentiated prospects. Vaccination has saved lives and is helping fuel a nascent recovery, but risks are elevated amidst new virus variants, high debt, and poverty. In advanced economies, the shift in fiscal support toward medium-term packages to “build back better” will have overall positive effects globally. Emerging markets and low-income developing countries face a more challenging outlook, with permanent economic scarring and revenue losses. They need international support to increase vaccine availability and financing to achieve the Sustainable Development Goals. Many countries find themselves in a situation where fiscal support is still invaluable to protect lives and livelihoods. At the same time, governments are also facing questions on their elevated debt and gross financing needs. Chapter 2 provides countries with guidance on how they can both avoid withdrawing fiscal support too early, and yet signal to the public that their debt levels are sustainable in the long run. To commit to future deficit reduction, governments have several instruments, including undertaking structural fiscal reforms (such as pension reform or subsidies reform), pre-legislating changes to taxes or spending, committing to fiscal rules that lead to deficit reduction in the future. Countries that follow debt rules, for instance, manage to reduce debt faster that other countries, although fiscal rules should also provide enough flexibility to spend in times of need. Overall, governments that commit to sound public finances and that achieve high levels of fiscal transparency reap meaningful benefits: their budgets are more credible, their announcements are better perceived by the media, and they pay lower interest rates on their debt.

Debt service suspension initiative (DSSI) An initiative in which bilateral official creditors provide during a limited period a suspension of debt service payments for the poorest countries (73 low and lower middle-income countries) that request the suspension.

Economic scarring Long-lasting economic damage.

Fiscal consolidation Fiscal policy that reduces government deficits and government debt.

Fiscal council A permanent agency with a statutory or executive mandate to assess publicly and independently fiscal policy, fiscal plans, and fiscal performance against official objectives, such as long-term sustainability of public finances and macroeconomic stability.

Fiscal framework The set of rules, procedures, and institutions that guide fiscal policy.

Fiscal rule Fiscal rules are lasting constraints on fiscal policy through predetermined numerical limits on aggregate fiscal indicators (such as the budget balance, government expenditure, debt).

Fiscal space The room for undertaking discretionary fiscal policy (increasing spending or reducing taxes) relative to existing plans without endangering market access and debt sustainability.

Gini Statistical measure of dispersion. It is used to measure the degree of similarity or the degree of inequality (dispersion) in incomes, consumption, and wealth levels. Its values fall in a range between 0 and 1. A value of 0 is seen when there is perfect equality; a value of 1 is seen when there is very high inequality (for example, only one person owns the totality of the wealth in the economy).

Global minimum tax in corporate profits (GILTI) A global minimum tax in corporate profits is an agreement to limit tax competition among countries by putting a foor on effective tax rates applied to investments by large multinational corporations that is done across countries. The GILTI is a specific formula to calculate such minimum and is designed to result in a range for tax rate on foreign income between 10.5 percent and 13.125 percent.

Government financing needs (also gross financing needs) Overall new borrowing requirement plus debt maturing during the year.

Labor force participation The share of population of working age that is either looking for a job or working. It measures the availability of labor for productive activities in an economy.

Special drawing rights (SDRs) An international reserve asset created by the IMF to supplement the official reserves of its member countries. It is not a currency but a potential claim on the freely usable currencies of IMF members. As a claim on currencies, SDRs can provide a country with liquidity.

Stock-flow adjustments Change in the gross debt explained by factors other than the overall fiscal balance (for example, valuation changes).

Sustainable Development Goals A collection of 17 goals set by the United Nations General Assembly in 2015 covering global warming, poverty, health, education, gender equality, water, sanitation, energy, urbanization, environment, and social justice. Each goal has a set of targets to achieve, and in total there are 169 targets.

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Cover Strengthening the Credibility of Public Finances
Strengthening the Credibility of Public Finances
Author:
International Monetary Fund
ISBN:
9781513584140
ISSN:
2219-276X
Publication Date:
13 Oct 2021
Publisher:
International Monetary Fund
DOI:
https://doi.org/10.5089/9781513584140.089
Pages:
113