Business and Economics > Budgeting
Abstract
Two main themes of the book are that (1) politics can distort optimal fiscal policy through elections and through political fragmentation, and (2) rules and institutions can attenuate the negative effects of this dynamic. The book has three parts: part 1 (9 chapters) outlines the problems; part 2 (6 chapters) outlines how institutions and fiscal rules can offer solutions; and part 3 (4 chapters) discusses how multilevel governance frameworks can help.
Abstract
Continued progress in reducing advanced economy deficits and a gradually improving external environment have lowered short-term fiscal risks, according to this issue, but global prospects nevertheless remain subdued, and many advanced economies face a lengthy, difficult, and uncertain path to fiscal sustainability. Though many advanced economies are now close to achieving primary surpluses that will allow them to stabilize their debt ratios, this is only a first step, as merely stabilizing advanced economy debt at current levels would be detrimental to medium- and longer-term economic prospects. The key elements of the required policy package are well known: foremost among them is setting out—and implementing—a clear and credible plan to bring debt ratios down over the medium term. Debt dynamics have remained relatively positive in most emerging market economies and low-income countries, and most plan to continue to allow the automatic stabilizers to operate fully, while pausing the underlying fiscal adjustment process. Those with low general government debt and deficits can afford to maintain a neutral stance in response to a weaker global outlook. But countries with relatively high or quickly increasing debt levels are exposed to sizable risks, especially once effective interest rates rise as monetary policy normalizes in the advanced economies and concessional financing from advanced economies declines. The widespread use of energy subsidies makes commodity prices an additional source of vulnerability in many emerging market and low-income economies; subsidy reform, higher consumption taxes, and broadening of tax bases would help support consolidation efforts.
Abstract
The IMF carries out its mandate to foster macroeconomic stability and thereby facilitate prosperity by promoting the adoption of sound policies and international cooperation. Ultimately, the means to achieve these goals is to have Fund policy advice translated into concrete action. Key to achieving such traction is the relationship between Fund staff and member country authorities, together with the quality of the advice and members’ confidence in it. That is, the Fund needs to be seen as a trusted advisor. This evaluation examines in what circumstances the Fund is viewed as a trusted advisor to its member countries. It uses evidence gathered since 2005, but emphasizes the period since the onset of the global crisis in 2007–08. Because the concept of trusted advisor is “in the eyes of the beholder,” the evaluation derives the main attributes from country authorities themselves.