Hidetaka Nishizawa, Mr. Scott Roger, and Huan Zhang
Pacific island countries (PICs) are vulnerable severe natural disasters, especially cyclones, inflicting large losses on their economies. In the aftermath of disasters, PIC governments face revenue losses and spending pressures to address post-disaster relief and recovery efforts. This paper estimates the effects of severe natural disasters on fiscal revenues and expenditure in PICs. These are combined with information on the frequency of large disasters to calculate the rate of budgetary savings needed to build appropriate fiscal buffers. Fiscal buffers provide self-insurance against natural disaster shocks and facilitate quick disbursement for recovery and relief efforts, and protection of spending on essential services and infrastructure. The estimates can provide a benchmark for policymakers, and should be adjusted to take into account other sources of financing, as well as budget risks from less severe as well as more frequent disasters.
ratio. Economic buoyancy has reinforced this cycle by facilitating the tax cuts and increases in social spending that have been instrumental to the social consensus on policies, while also helping to keep deficits low. As a result, the Exchequer borrowing requirement (EBR) has averaged about 2 percent of GNP during 1988-96, and the Exchequer debt ratio has Men from 125 percent of GNP at end-1987 to less than 81 percent in 1996 ( Chart 1 and Table 1 ).
CHART 1. IRELAND GOVERNMENTFINANCESources: Department of Finance, Economic Statistics.
primary surpluses were generated.
CHART 4 IRELAND GOVERNMENTFINANCESource: Department of Finance, Economic Statistics.
The economic backdrop to rapid fiscal consolidation was exceptionally favorable, characterized by declining interest rates and rapid growth. Interest payments as a percent of GNP consequently fell during the period from 11.2 percent to 7.2 percent. Rapid growth also facilitated tax collection, and tax amnesties in 1988 and 1994 contributed to revenue surges and a broadening of the tax base that resulted in an average tax
Miss Yinqiu Lu, Tao Sun, Ms. Laura E. Kodres, and Juli Kozack
reducing the revenue-expenditure mismatches in the local governments. In addition, it is necessary to establish a comprehensive framework to regulate and supervise local government budgets and its financing. Moreover, it is important to ensure that resources obtained from the sale of land use rights are sustainable, which requires a comprehensive plan for land capitalization. Finally, it is beneficial to encourage the development of a local government bond market to help diversify local governments’ financingsources and promote capital market development.
Hidetaka Nishizawa, Mr. Scott Roger, Huan Zhang, and Ms. Alison Stuart
insurance companies. Another potential source of domestic financing is the central bank, but in general central bank financing should be strictly limited on account of risks of fiscal dominance that would destabilize the economy through possible higher inflation.
National Provident Funds (NPFs) in PICs would be a possible source for financing rebuilding, though more likely for the private sector than for the government ( Box 3 ). Some PICs have mobilized pension funds, but as a disaster relief instrument instead of as a governmentfinancingsource. For example, Fiji
resulted in a substantial decline in output and foreign reserves, as well as an increase in public debt to over 90 percent of GDP ( Figures 1 and 2 ).
Figure 1. Samoa: Output, Prices, and GovernmentFinanceSources: Data provided by the Samoa authorities; World Bank, and Fund staff estimates.
Figure 2. Samoa: External Developments
Sources: Data provided by the Samoa authorities; and Fund staff estimates.
2. These challenges prompted a major review of economic policy, culminating in the introduction of a comprehensive economic reform program in
policies between the Ministry of Finance (MOF) and the ANB.
49. Strengthening fiscal policy will require a less fragmentary approach to managing the use of oil revenue and a careful analysis of the overall implications for domestic demand . Currently, oil revenue is managed by different government agencies (the state budget and SOFAZ) and the use of resources is not systematically coordinated. While assets from the SOFAZ are primarily directed towards capital projects, revenues accruing from SOCAR’s domestic operations are perceived as a general governmentfinance
China’s rapid credit expansion in 2009–10 brought local government financing platforms (LGFPs) into the spotlight. This paper discusses their function, reasons behind their recent expansion, and risks they are posing to the financial sector, local governments, and sovereign balance sheet. This paper argues that LGFPs were a fortune for China in the past, but would turn out to be a misfortune if the causes of the rapid expansion of LGFPs are not addressed promptly. In this context, the paper proposes ways to avoid misfortune by: acknowledging and addressing the revenue and expenditure mismatches at the local government level; establishing a comprehensive framework to regulate and supervise local government budgets; ensuring the sustainability of the financial resources obtained from the sale of land use rights; and developing local government bond markets and promoting financial reforms.
This note reflects macroeconomic and fiscal forecasts presented with the April 2009 World Economic Outlook, as well as information on fiscal stimulus and financial and industrial sector support gathered through mid-May. It follows the request by G-20 leaders for the Fund to assess regularly the actions taken by countries to address the global crisis and accelerate the recovery.
This 2003 Article IV Consultation highlights that Samoa’s GDP growth slowed to 1.9 percent in 2001/02. This slowdown reflected mainly a steep decline in agriculture and a sharp contraction in construction activity. Although underlying inflation has remained low, headline inflation accelerated in this period, rising from 1.1 percent in 2000/01 to 9.8 percent in 2001/02 as a result of food supply shortages. Supervision in the financial sector has been enhanced by bringing all nonbank institutions under the supervisory regime of the central bank, and guidelines governing the supervision of these institutions are currently being developed.