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Business and Economics > Public Finance

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Cover IMF Staff Country Reports
The Bahamas: Selected Issues
International Monetary Fund. Western Hemisphere Dept.
2024 Selected Issues
Keywords:
quantifying climate; IMF staff calculation; climate change risk; housing affordability; alleviating supply constraint; housing affordability in The bahamas; Climate change; Electricity; Housing; Natural disasters; Global; Caribbean
Cover High-Level Summary Technical Assistance Reports
Kiribati: Agricultural Subsidies for Copra: Improving Efficiency and Equity and Balancing Trade-offs
International Monetary Fund. Fiscal Affairs Dept.
This technical assistance mission assessed Kiribati’s agricultural output price scheme that subsidizes the production of copra (dried coconut). The mission estimates that subsidies in 2023 amounted to 7.8 percent of GDP. The scheme’s technical and allocative inefficiencies, incidence in rural areas, and high fiscal cost, could be mitigated in the short- and medium term, by scaling back the subsidies, replacing them in part with cash transfers and public goods provision in the outer islands, securing fiscal savings in the process, and introducing competitive elements in the copra value chain.
Keywords:
Kiribati; subsidy; agriculture; efficiency; equity; expenditure; IMF activity; subsidy scheme; copra value chain; value chain concern; farmgate price; public goods provision; Government subsidies; Export prices; Agricultural sector; Consumption
Cover IMF Working Papers
The Political Economy of Fossil Fuel Subsidy Removal: Evidence from Bolivia and Mexico
Mariza Montes de Oca Leon
,
Achim Hagen
, and
Franziska Holz
We study the impact of fossil fuel subsidy removal on presidential popularity using difference-indifference approaches and a stylized theoretical model. Analyzing macro level data for two subsidy removal events in Mexico and Bolivia in the early 2010s, we find evidence of a negative impact on presidential approval. Our theoretical probabilistic voting model predicts that the decline in popularity is driven by high income groups if subsidies are regressive, and that lack of trust in the government lowers popularity of the removal in all income groups. We confirm these predictions using micro level data for the Mexican subsidy removal event.
Keywords:
Political economy; Fossil fuels; Subsidy removal; removal event; on approval rating; outcome variable; outcome predictor; Energy subsidies; Income; Fuel prices; Non-renewable resources; Gasoline; Caribbean
Cover IMF Staff Country Reports
Republic of South Sudan: 2023 Article IV Consultation, and First and Second Reviews under the Staff-Monitored Program with Board Involvement-Press Release; Staff Report; and Statement by the Executive Director for Republic of South Sudan
International Monetary Fund. African Dept.
This paper presents Republic of South Sudan’s 2023 Article IV Consultation, and First and Second Reviews under the Staff-Monitored Program with Board Involvement (PMB). South Sudan is significantly impacted by the war in Sudan, especially from a very large and growing number of refugees, and by a sharp decline in oil production and exports since mid-February 2024 due to damages to the oil pipeline. Article IV discussions focused on putting economic reforms on a sustainable footing, boosting domestic revenue mobilization, enhancing social spending, and implementing governance and transparency reforms to reduce corruption. The extension of the PMB provides time to the authorities to implement corrective actions to bring macroeconomic policies back on track and implement governance reforms; building a strong track record is essential for any financial arrangement with the IMF. In order to help address these challenges, as well as the fallout from the damage to the oil pipeline, the authorities have requested a 3-year arrangement under the Extended Credit Facility (ECF). Successful completion of the current PMB would help establish track record toward a potential ECF arrangement in the future.
Keywords:
BSS staff; auction rate; authorities endeavor; government program; FX auction; Debt sustainability analysis; Oil; Oil, gas and mining taxes; Global; Sub-Saharan Africa; Africa; Middle East
Cover IMF Staff Country Reports
Kiribati: Selected Issues
International Monetary Fund. Asia and Pacific Dept
This Selected Issues paper focuses on a case study on copra subsidy in Kiribati. The copra subsidy, disbursed as a minimum support price, is a major part of the social safety net in Kiribati. The subsidy has multiple purposes—including as a means to transfer resources to the outer islands and to stem migration to the capital. The horizontal diversification model shows that a higher subsidy on copra diverts production and labor towards copra but lowers overall income. The vertical diversification model demonstrates how a subsidy on a primary product increases its supply but reduces production of the final good. Considering the benefits, the government could boost the subsidy’s efficiency, replace the scheme with a poverty-targeted social assistance program, or impose a cap on payments. Development partners, including the IMF and the World Bank, stand ready to provide support in both areas as needed.
Keywords:
COPRA subsidy; Copra support price; price support scheme; impact of subsidy; household income expenditure survey report; cut support price; Price incentives; Agricultural commodities; Income; Exports; Pacific Islands; Global
Cover IMF Working Papers
Cash Flow Analysis of Fiscal Regimes for Extractive Industries
Thomas Benninger
,
Dan Devlin
,
Eduardo Camero Godinez
, and
Nate Vernon
Mining and petroleum projects share characteristics distinguishing them from other sectors of the economy, which has led to the use of dedicated fiscal regimes for these projects. The IMF’s Fiscal Affairs Department uses fiscal modeling to evaluate extractive industry fiscal regimes for its member countries, and trains country officials on key modeling concepts. This paper outlines important preconditions needed for effective fiscal modeling, key evaluation metrics, and emphasizes the importance of transparent modeling practices. It then examines the modeling of commonly-used fiscal instruments and highligts where their economic impact differs, and how fiscal models can inform fiscal regime design.
Keywords:
Natural resource taxation; extractive industries; progressivity; economic rents; fiscal modeling; investment analysis; mining; petroleum.; D. resource rent tax; cash flow; petroleum project; regime design; Corporate income tax; Production sharing; Fiscal Analysis of Resource Industries (FARI); Oil; Carbon tax; Global
Cover IMF Staff Country Reports
Democratic Republic of Timor-Leste: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Democratic Republic of Timor-Leste
International Monetary Fund. Asia and Pacific Dept
The 2023 Article IV Consultation discusses that Timor-Leste has made impressive progress since independence in 2002 but remains a fragile post-conflict nation with pressing development needs. With oil and gas production having recently come to a halt, progress on diversifying the economy and developing the private sector is urgently needed. The discussions focused on ensuring that Timor-Leste’s substantial savings are best utilized to support development objectives while achieving fiscal sustainability. In order to develop a vibrant private sector, Timor-Leste should undertake an ambitious agenda of reforms. Public expenditure should be reduced to align it with the economy’s absorptive capacity, and its quality improved including by further prioritizing spending on human and physical capital. Domestic revenue should be gradually mobilized. A medium-term fiscal framework should underpin these efforts by setting a clear roadmap to fiscal sustainability. To boost growth and diversify the economy, structural reforms should remove bottlenecks in the agriculture and tourism sectors and foster digitalization to boost productivity, while addressing legal constraints that hinder business operations and financial development.
Keywords:
Timorese authorities; fiscal cliff; private sector development; WTI crude; Timor-Leste authorities; Debt sustainability analysis; Oil; Global
Cover IMF Staff Country Reports
Paraguay: Second Review Under the Policy Coordination Instrument, Request for an Extension of the Policy Coordination Instrument, Modification of Targets, Inflation Band Consultation, and Request of Arrangement under the Resilience and Sustainability Facility-Press Release; Staff Report; and Statement by the Executive Director for Paraguay
International Monetary Fund. Western Hemisphere Dept.
This paper presents Paraguay’s Second Review under the Policy Coordination Instrument, Request for an Extension of the Policy Coordination Instrument, Modification of Targets, Inflation Band Consultation, and Request of Arrangement under the Resilience and Sustainability Facility (RSF). The government is committed to continued prudent macroeconomic policies and the implementation of structural reforms, including a series of adaptation and mitigation measures and to preserve and expand its green energy matrix. Barring global and weather-related external shocks, Paraguay’s growth prospects are bright. It remains important for Paraguay to rebuild fiscal buffers, including through implementation of long-standing structural reforms. The re-establishment of the fiscal deficit rule by 2026 is rightfully the government’s key priority. The authorities are committed to implementing an ambitious set of climate-related reforms consistent with maximum access under the RSF. The commitment to implement an ambitious matrix of climate-related reforms, closely coordinated with development partners, will help enhance the country’s image as a ‘green’ investment destination.
Keywords:
inflation expectation; inflation-targeting regime; sound capacity; BCP credit survey; RSF request; Climate change; Electricity; Global; South America
Cover IMF Staff Country Reports
Guyana: 2023 Article IV Consultation-Press Release; and Staff Report
International Monetary Fund. Western Hemisphere Dept.
The 2023 Article IV Consultation highlights that the Guyanese economy continues to experience record growth, supported by the government’s modernization plans and unparalleled oil and gas sector expansion. Guyana’s oil reserves per capita are one of the highest in the world. Going forward, oil production will continue to expand rapidly as four new fields will come on stream by end-2028. Sustained real non-oil gross domestic product growth is also expected, as the government continues to invest in human capital, lower energy costs, and build infrastructure, including for climate change adaptation. On the upside, further oil discoveries would continue to improve Guyana’s long-term economic prospects and a construction boom would support higher short-term growth than projected. The main downside risks are overheating, leading to inflationary pressures and appreciation of the real exchange rate beyond the level implied by a balanced expansion of the economy. Policy discussions focused on the authorities’ ambitious plans to rapidly transform Guyana using revenues from oil extraction, while ensuring macroeconomic and financial stability, mitigating risks, and adapting to climate change.
Keywords:
IMF FSAP; Guyanese economy; monetary policy stance; development needs; ocean economy; construction boom; Public sector; Oil; Caribbean; Global
Cover IMF Staff Country Reports
West Bank and Gaza: Selected Issues
International Monetary Fund. Middle East and Central Asia Dept.
This Selected Issues paper focuses on economic divergence in West Bank and Gaza. Years of isolation and continuous conflicts have left Gaza’s economic development far behind that of the West Bank. In 2022, per capita income in Gaza was only a quarter of that in the West Bank, and unemployment and poverty rates were much higher. This reflects much lower employment and investment rates as well as considerably lower productivity growth. While Israeli-imposed restrictions on access and movement of labor and goods severely hinder trade outcomes and productive capacity in both West Bank and Gaza, restrictions are far more severe for Gaza. As a result of this Gaza blockade and repeated wars with Israel since 2008, the capital stock is stagnant and infrastructure is derelict (especially electricity). Analytical work suggests sizeable economic gains from boosting Gaza’s electricity infrastructure. Prospects for declining donor aid risk worsening Gaza’s humanitarian crisis. Under these conditions, Gaza is unlikely to meet the U.N. 2030 Sustainable Development Goals. A major easing of the blockade and financing constraints is necessary to improve prospects, provided the security situation can be assured in parallel.
Keywords:
Economic sectors; Financial intermediation; Labor; Trade barriers; Pensions; Pension reform; B. labor markets; I-O Analysis; Defined-Benefit component; A. economic developments; old-age benefit; benefits by career length; Electricity; Infrastructure; Labor markets; Pension spending