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Business and Economics > Public Finance

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Cover IMF Staff Country Reports
Central African Economic and Monetary Community (CEMAC): Press Release; Staff Report; and Statement by the Executive Director
International Monetary Fund. African Dept.
The CEMAC’s economy lost momentum in 2023. The external position weakened, with the current account shifting to a deficit and foreign reserve accumulation slowing. While inflation continued to ease, it remained elevated. Available data indicate a deterioration in the underlying fiscal positions of many countries. The near-term outlook points to stronger economic activity, with growth projected to accelerate to 3.2 percent in 2024, supported by elevated oil prices and a rebound in oil output. However, the end-June 2024 regional policy assurance on NFA––and, according to preliminary information, the end-December 2024 targets––were not met, indicating a deviation in reserves from the targeted path. Debt vulnerabilities have also worsened in some countries, as evidenced by the growing pressures in the regional government debt market. Following the strong commitment expressed at the extraordinary Heads of State Summit in December 2024 to address macroeconomic imbalances and strengthen regional institutions, all countries are expected to tackle fiscal slippages, restore fiscal prudence, and implement structural reforms to steer the region toward a more resilient medium-term outlook. This should help reduce risks to the capacity to repay the Fund. However, the projections remain uncertain, as the details of corrective measures and reforms are still being finalized between staff and national authorities.
Keywords:
CEMAC authorities; CEMAC country; CEMAC economy; CEMAC heads of state; policy assurance; Financial sector stability; Anti-money laundering and combating the financing of terrorism (AML/CFT); Government securities; Fiscal stance; Global; Central Africa
Cover IMF Working Papers
Evaluating Historical Episodes using Shock Decompositions in the DSGE Model
Zamid Aligishiev
,
Michael Ben-Gad
, and
Joseph Pearlman
We present alternative methods for calculating and interpreting the influence of exogenous shocks on historical episodes within the context of DSGE models. We show analytically why different methods for calculating shock decompositions can generate conflicting interpretations of the same historical episodes. We illustrate this point using an extended version of Drautzburg and Uhlig’s (2015) model of the U.S. economy, focusing on the periods 1964–1966, 1979–1987, 2006–2009, 2016–2020 and 2020–2023. We argue that the best method for analyzing particular episodes is one which isolates the influence of the shocks during the period under consideration and where the initial conditions represent the system’s distance from balanced growth path at the beginning of the episode.
Keywords:
DSGE model; Shock Decomposition; Financial Frictions; Fiscal Policy; copyright page; influence of the shock; monetary policy shock; differencing method; decomposition method; Sovereign bonds; Central bank policy rate; Private investment; Public investment spending; Global
Cover Selected Issues Papers
Estimating Fiscal Multiplier for Qatar: Qatar
Ken Miyajima
Econometric results suggest that Qatar’s strong capital spending multiplier became less impactful as the stock of capital rose to a high level, likely as the marginal impact declined. This supports Qatar’s strategy to shifts the State’s role to an enabler of private sector-led growth, focusing on expenditure to support build human capital and implementation of broader reform guided by the Third National Development Strategy.
Keywords:
Capital spending; fiscal multiplier; GCC; Qatar; strategy to shift; Qatar's strategy; copyright page; Qatar country dummy; allocation decision; Fiscal multipliers; Current spending; Stocks; Global
Cover Global Financial Stability Notes
Pension Funds and Financial Stability
This Global Financial Stability Note examines the growth of the pension fund sector and the potential financial stability implications. Historically, pension funds have been seen as a contributor to financial stability because of their long-term and well-diversified liabilities. However, the sector has undergone significant structural shifts accelerated by a prolonged period of low interest rates, increasing its exposure to traditional risks while introducing emerging risks; this is reflected in growing intra-financial sector interconnectedness and exposure to long-term sovereign bonds. The recent transition to higher interest rates should be positive for the pension sector, albeit its pace and abruptness has been associated with liquidity stress and contagion risks in some countries.
Keywords:
Pension Funds; Financial Stability; Assets; Risks; Pension Plans; major pension fund sector; IMF Library; major pension savings market; structural liquidity; asset-liability duration mismatch; risk analysis; Pension spending; Pensions; Financial sector stability; Liquidity risk; Global
Cover IMF Working Papers
Pension Reform and Stock Market Development
Shujaat Khan
,
Bo Li
, and
Yunhui Zhao
We highlight the strong connection between developing fully-funded, individually-owned, collectively-managed, mandatory/incentivized (FICMI) pension schemes and the development of domestic stock markets. We do so by building a stylized model and complementing the analysis with cross-country empirical analysis and case studies. We also highlight the challenges of individual impatience, network externalities, and coordination failure in long-term equity investments, which are crucial for stock market development and technological innovation. We find that FICMI pension schemes—when sufficiently wide in coverage and large in size—can serve as coordination devices to support long-term equity investments. Such investments will not only promote domestic stock market development and make it easier for firms to raise long-term equity capital, therefore supporting long-term economic growth, but also enhance financial inclusion and enable more households to benefit from the overall economic development, therefore contributing to inclusive growth. Moreover, we find that the introduction of FICMI pension schemes can impact household savings in two ways: first, FICMI pension can increase household savings through “forced/incentivized” savings channel, where households save too little without FICMI pension (such as in many EMDEs); and second, FICMI pension can decrease household savings and increase household consumption by reducing non-pension savings and decreasing precautionary savings, where households save too much without FICMI pension (such as in China). In both cases, FICMI pension schemes can help move the economy closer to the optimal level of household savings, and may also help improve the structure of such savings. Finally, we discuss the enabling conditions (such as a strong political commitment to the reform and a well-designed fiscal strategy for financing the transition) and policy design for FICMI pension schemes.
Keywords:
Pension Reforms; Stock Market Development; Equity Financing; Innovation' Financial Inclusion; Intertemporal Optimization; Public Pensions; Funded and Private Pensions; FICMI pension schemes; household saving; savings channel; IMF working paper No. 25/49; Pension spending; Pensions; Stock markets; Pension reform; Capital markets; East Asia
Cover Selected Issues Papers
Post-Pandemic Changes to Chile’s Financial Markets: Chile
Tatsushi Okuda
Pension fund withdrawals, rising public debt, and the Central Bank of Chile’s pandemic liquidity injections have reshaped Chile’s financial landscape. In the context of the diminished demand for local bonds, large non-financial corporations and the government relied more on foreign investors. Overall, Chile’s financial depth has diminished, and markets have become more volatile and sensitive to shocks. Restoring pension funds as well as continuing to strengthen market resilience and crisis response capabilities are essential for ensuring future financial stability.
Keywords:
Financial sector stability; Financial depth; Pension fund withdrawal; market resilience; pandemic liquidity injection; Chile's financial markets; I. Chilean pension funds; Pension spending; Sovereign bonds; Bonds; Corporate bonds; COVID-19; Global
Cover IMF Staff Country Reports
Thailand: Selected Issues
International Monetary Fund. Asia and Pacific Dept
2024 Selected Issues
Keywords:
fan chart; household debt; Thailand's debt ceiling; public debt debt ceiling; estimates of debt limits; Debt limits; Consumer credit; Loans; Consumer loans; Global; Eastern Europe
Cover IMF Staff Country Reports
Nicaragua: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Nicaragua
International Monetary Fund. Western Hemisphere Dept.
The Nicaraguan economy is experiencing robust growth. Real GDP growth accelerated to around 4½ percent in 2023 and the first half of 2024, from about 3.8 percent in 2022, on the back of robust domestic demand, while inflation is moderating. Prudent macroeconomic policies and record-high remittances sustained this performance, a decrease in the estimated poverty ratio, and also led to twin surpluses, a steady decline in debt, and the accumulation of strong buffers. Gross international reserves reached US$5.7 billion, or 7.2 months of imports, by end-October 2024. The economy remains open and resilient, after confronting multiple large shocks, and on a backdrop of transfers of private property to the state, international sanctions, and reorientation of official financing. Going forward, domestic and international political developments may impact economic performance, by potentially increasing the cost of doing business and impacting other cross-border flows.
Keywords:
update safeguard assessment; transmission mechanism; Policy coordination; safeguards recommendation; tax audit procedure; exports threshold; authority of the BCN; headline inflation; Public sector; Financial sector stability; Global; Central America; Caribbean
Cover IMF Staff Country Reports
Chile: 2024 Article IV Consultation-Press Release; and Staff Report
International Monetary Fund. Western Hemisphere Dept.
The economy is broadly balanced but modest potential growth has constrained increases in living standards and makes it difficult to address fiscal and social needs. Policy priorities are therefore mainly of structural nature. They include boosting productivity and employment as well as strengthening fiscal, external, and financial sector buffers—particularly in the context of a challenging global environment.
Keywords:
pension reform bill; draft bill; FSAP mission; liquidity risk supervision; interest rate risk supervision; Fiscal stance; Inflation; Labor markets; Global; South America
Cover IMF Staff Country Reports
Chile: Selected Issues
International Monetary Fund. Western Hemisphere Dept.
2024 Selected Issues
Keywords:
input-output linkage; housing wealth effect; growth slowdown; real estate sector; risk assessment; Pension spending; Exports; Mortgages; Loans; Global; Eastern Europe