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Business and Economics > Budgeting

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Cover Departmental Papers
Upgrading Fiscal Frameworks in Asia-Pacific
Enrique Flores
,
Pranav Gupta
,
Yinqiu Lu
,
Paulo A Medas
,
Dinar Prihardini
,
Hoda Selim
,
Weining Xin
, and
Masafumi Yabara
This paper seeks to guide the reform of fiscal frameworks in Asia-Pacific in the context of calls for a more active fiscal policy in a shock-prone world. It highlights that the cost of fiscal support is large and that fiscal frameworks, including fiscal rules, are being put to the test given the sharp increase in debt, high interest and weaker growth prospects. The stress is only compounded by long-term challenges like aging populations, climate change and the need to deliver on the sustainable development goals. In this context, it is timely to review the effectiveness of fiscal policy in Asia-Pacific and seek for ways to strengthen fiscal frameworks. After the global financial crisis, fiscal policy in Asia-Pacific became more countercylical and stronger than in other regions—especially in advanced economies. The paper shows that the degree of countercyclicality has been asymetric, with larger responses during periods of weak growth, and in particular in response to large shocks—the global financial crisis and the pandemic. It highlights that responses to the pandemic were large and used a wide range of tools, and how fiscal and monetary policy complemented each as they responded to large shocks. It looks into the deterioration of debt dynamics in Asia-Pacific, as public debt has been rising persistently across most countries driven by declining growth and rising deficits—particualrly after the global financial crisis for advanced economies and after the pandemic for emerging market and low income countries. The paper reviews fiscal frameworks across Asia-Pacific, including the use of fiscal rules, medium-term fiscal frameworks, and fiscal councils. It describes the characteristics of fiscal rules, which usually focus on debt and budget balances and are set by law but tend to lack well-specified enforcement mechanism or escape clauses. It highlights that compliance with the rules has worsened following the pandemic as—in contrast with the outturns before the pandemic--Asia-Pacific countries tend to show larger deviations relative to other regions. It also shows that despite the increase adoption of medium-term fiscal frameworks in Asia-Pacific forward guidance has been hampered by the lack of binding targets and ex-post analysis. Moreover, they do not seem to have resulted in better macro-fiscal forecast in part due to weak capacity and enforcement, lack of integration with the annual budget, and exposure to shocks—with risk analysis mostly limited to qualitative discussions. Proposed reforms seek to implement a comprehensive, risk-based approach to public finances. They focus on strengthening the medium-term orientation of fiscal policy through credible medium-term fiscal plans, fiscal rules linked to the medium-term strategy and the annual budgets, and a stronger reliance on fiscal councils. They also emphasize the need for a broader view of the public sector as fiscal policy is being conducted through multiple channels, which requires assessing and managing vulnerabilities and a significant improvement in fiscal statistics. They also address aging and climate change by focusing on assessing large intergenerational trade-offs, reporting on long-term debt dynamics, and on green medium-term fiscal frameworks that incorporate the effects of climate change and climate policies.
Keywords:
Fiscal Rules Fiscal Frameworks Medium-term Fiscal Frameworks Public Debt Sustainability automatic stabilizers Climate Change Population Aging; Asia-Pacific country; Asia-Pacific economy; Asia-Pacific region; IMF country team; SRDSF country; Fiscal rules; Fiscal governance; Global financial crisis of 2008-2009; Asia and Pacific; Global; Pacific Islands
Cover IMF Working Papers
Inclusive GovTech: Enhancing Efficiency and Equity Through Public Service Digitalization
Manabu Nose
How could the GovTech improve budget processes and execution efficiency? Could the GovTech strengthen redistributive function of public expenditure? Based on an event-study method, this paper finds that the introduction of digital budget payments and e-procurement could significantly enhance budget transparency and help expand the coverage of social assistance to reach the most vulnerable population. Exploiting staggered adoption of digital budget payments, a synthetic control regression identifies meaningful increase in pre-tax income shares among the bottom 50th percentile and female workers, especially for emerging market and developing countries, with effects materializing gradually over 10-year period. The paper delves into the potential mechanism driving these equity benefits, highlighting the reduction in business informality as a primary channel. However, the paper emphasizes that the mere adoption of GovTech strategies or digital technologies is insufficient to unlock its full potential. The outcomes are intricately linked to supporting policies, regulations, organizational and system integration, and robust digital connectivity. The paper underscores that inter-agency coordination facilitated by a dedicated GovTech institution emerges as a critical factor for reaping both efficiency and equity gains from GovTech initiatives.
Keywords:
GovTech; Inclusion; Staggered technology adoption; Synthetic control; Expenditure efficiency; Coordination in organizations; budget transparency; GovTech adoption; GovTech maturity; budget payment; inclusive GovTech; Digital financial services; Digitalization; Income; Budget planning and preparation; Asia and Pacific; Sub-Saharan Africa; Middle East and Central Asia; Western Hemisphere
Cover IMF Working Papers
Brazil: Tax Expenditure Rationalization Within Broader Tax Reform
Maria Delgado Coelho
The excessive complexity and burden of the Brazilian tax system, riddled by cumulative indirect taxes and heavy payroll contributions, have led to an accumulation of fiscal incentives aimed at reducing its burden on taxpayers and productive activities. Federal and subnational tax expenditures currently stand at over 5 percent of GDP. Rationalizing them can only be comprehensively feasible in the context of a broader sequenced tax reform, and could reduce resource misallocation and income inequality, as well as provide new revenues.
Keywords:
rationalization experience; Labor tax wedge; sequenced tax reform; cost of capital; zero rating; tax relief; single tax; Tax expenditures; Corporate income tax; Tax incentives; Personal income tax; Social security contributions; Global
Cover IMF Working Papers
Enhancing Fiscal Transparency and Reporting in India
Patrick Blagrave
and
Mr. Fabien Gonguet
Current fiscal transparency and reporting practices in India place it behind most peer G20 economies, implying that policy makers are lacking critical data to ground their fiscal and other economic planning decisions. The increasing use of off-budget financing at the central government level in recent years represents one key example of reduced transparency—we provide estimates of the public sector borrowing requirement and an extended notion of the fiscal deficit, each of which shows a more expansionary stance in recent years than ‘headline’ deficit figures presented in budget documents. We then investigate the current state of fiscal reporting practices in India and suggest areas for reforms—these include enhanced IT systems, stronger central-local coordination, and a gradual transition to accrual accounting.
Keywords:
Government Statistics; Budget Systems; India; WP; Union government; cash-basis accounting regime; General government data; borrowing need; government activity; Fiscal Reporting; Government debt management; Budget planning and preparation; Fiscal risks; Africa; Global
Cover IMF Staff Country Reports
India: Technical Assistance Report-State of Tamil Nadu-Modernizing Budget Formulation and Managing Fiscal Risks
International Monetary Fund. Fiscal Affairs Dept.
Although Tamil Nadu’s public financial management has been characterized by strong fiscal discipline to date, risks and challenges are emerging. The State has largely observed the Fiscal Responsibility Act targets on debts and deficit (25 percent and 3 percent to GSDP, respectively) except during the electricity bailout in 2016–17.1 However, these targets appear to have been met by (1) controlling and delaying expenditure, (2) underallocating mandated payments to various reserve funds, and (3) allowing off-budget borrowing by Public Sector Undertakings (PSUs). Accordingly, the State’s borrowing capacity is restricted, leaving limited fiscal space to address high priority needs in education, health, electricity, roads, and water sectors, as well as to address growing infrastructure pressures. More than 63 percent of the State’s spending on current items is committed, to salaries, pensions, and interest payments. Little room remains for additional borrowing to fund spending pressures; moreover, climate change is likely to exacerbate fiscal risks from water stress and natural disasters.
Keywords:
ISCR; CR; formulation process; state government; government policy document; Union government format; pension liability; Tamil Nadu budget calendar; debt management; fiscal policy; short term; Budget planning and preparation; Fiscal risks; Fiscal reporting; Africa; Global; Southeast Asia; South Asia
Cover IMF Staff Country Reports
The Gambia: Request for a Staff-Monitored Program; Press Release and Staff Report
International Monetary Fund. African Dept.
This paper discusses The Gambia’s request for a Staff-Monitored Program (SMP). The Gambia is enjoying a strong economic recovery, with good prospects of sustained growth over the medium term. In order to consolidate gains and establish a track record for a possible arrangement under the Extended Credit Facility, the authorities are requesting a new SMP covering 2019. The SMP will help build an adequate track record of performance for a potential Fund-supported program. Enhanced domestic revenue mobilization and expenditure control will help create room for much needed public investment and poverty-reducing social spending. The program’s strategy includes fiscal policy to focus on domestic revenue mobilization, improved treasury management and spending prioritization. A prudent borrowing strategy and strengthened oversight of state-owned enterprises, with the focus on containing contingent liabilities, is expected to contribute to anchoring debt sustainability. Monetary policy will remain active to curb inflation pressures and banking supervision vigilant to foster financial stability.
Keywords:
ISCR; CR; Staff-Monitored Program; debt; management of the International Monetary Fund; debt service; TA strategy; envisaged debt restructuring; financial support; burden threshold; fiscal consolidation; service-to-revenue ratio; authorities' fiscal consolidation; dynamics equation; GDP deflator; debt ratio; sustainability framework; Debt sustainability analysis; Budget planning and preparation; Debt service; Africa; Sub-Saharan Africa; Global
Cover Staff Discussion Notes
Second-Generation Fiscal Rules: Balancing Simplicity, Flexibility, and Enforceability
Luc Eyraud
,
Mr. Xavier Debrun
,
Andrew Hodge
,
Victor Duarte Lledo
, and
Ms. Catherine A Pattillo
Fiscal rule frameworks have evolved significantly in response to the global financial crisis. Many countries have reformed their fiscal rules or introduced new ones with a view to enhancing the credibility of fiscal policy and providing a medium-term anchor. Enforcement and monitoring mechanisms have also been upgraded. However, these innovations have made the systems of rules more complicated to operate, while compliance has not improved. The SDN takes stock of past experiences, reviews recent reforms, and presents new research on the effectiveness of rules. It also proposes guiding principles for future reforms to strike a better balance between simplicity, flexibility, and enforceability. Read the blog
Keywords:
SDN; fiscal rule; business cycle; deficit bias; Fiscal policy; debt; fiscal rules; fiscal governance; balance rule; expenditure rule; rule effectiveness; rule adoption; Fiscal stance; Budget planning and preparation; Global; Europe
Cover Fiscal Policies and Gender Equality
Fiscal Policies and Gender Equality

Abstract

This volume contains seven chapters that consider how fiscal policies can address women’s and girls’ disadvantages in education, health, employment, and financial well-being. Researchers from a joint collaboration between the International Monetary Fund and the UK’s Department for International Development presented papers at a 2016 international conference on gender budgeting at the International Monetary Fund headquarters in Washington, DC, and detail the findings of their work here, which draws on published materials, a questionnaire sent to ministries of finance to all International Monetary Fund member countries, and interviews with country officials and international organizations that offer technical assistance to countries seeking to implement gender budgeting. They describe key gender budgeting efforts planning, allocating, and monitoring government expenditures and taxes to address gender inequality in sub-Saharan Africa, Asia and the Pacific, Europe, Latin America and Canada, the Middle East and Central Asia, and the Pacific Islands and Caribbean.

Keywords:
BOOK; government; country; Rwanda; government institution; gender disparity; budget statement; gender analysis; gender-disaggregated data; Gender budgeting; Gender inequality; Women; Budget planning and preparation; Caribbean; Sub-Saharan Africa; Pacific Islands; Middle East and Central Asia; Europe
Cover Policy Papers
FY2017--Output Cost Estimates and Budget Outturn Paper
International Monetary Fund
With continued efforts to maximize the use of available resources, the FY 17 outturn represents a small increase in spending within a largely flat budget envelope. Reallocations from lower priority areas and efficiency gains, along with flexibility provided by carry forward resources enabled the Fund to deliver on the initiatives and priorities in the Global Policy Agenda and Management’s Key Goals. In terms of outputs, there was a small shift in spending from country and regional work to policy work. Within the former, spending moved from lending activities towards bilateral surveillance and capacity development. In terms of inputs, the structural budget was almost fully utilized. Highlights are presented followed by a discussion of the outputs and inputs. Details on capacity development are presented in the Annex.
Keywords:
PP; fy; spending; cost; personnel; The Fund; office of budget; governance expenditure; spending increase; personnel spending; Budget planning and preparation; Securities; Total expenditures; Capital spending; Global
Cover IMF Staff Country Reports
Nepal: 2017 Article IV Consultation-Press Release; Staff Report
International Monetary Fund. Asia and Pacific Dept
This 2017 Article IV Consultation highlights the rebound of Nepal’s economy following a slowdown caused by the 2015 earthquakes and trade disruptions at the southern border. The growth of real GDP at market prices slowed to 0.6 percent in 2015/16 (mid-July 2015 to mid-July 2016). Due to trade disruption, shortages of fuel and other essential goods drove up inflation to 12 percent (year over year) in January 2016, but it eased subsequently to 3.2 percent in January 2017, mainly because of lower food prices. Growth is projected to reach 5.5 percent in 2016/17, and inflation is expected to undershoot the central bank’s mid-2017 target of 7.5 percent.
Keywords:
ISCR; CR; exchange rate; real GDP; financing; growth; GDP deflator; credit growth; growth dividend; Nepalese rupee; growth of remittance; medium-term growth; Nepali authorities; GDP ratio; Credit; Budget planning and preparation; South Asia; Asia and Pacific; Global