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Business and Economics > Public Finance

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Cover IMF Staff Country Reports
Iraq: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Iraq
International Monetary Fund. Middle East and Central Asia Dept.
The 2024 Article IV Consultation highlights that domestic stability has improved since the new government took office in October 2022, facilitating the passage of Iraq’s first three-year budget, which entailed a large fiscal expansion starting in 2023. The ongoing fiscal expansion is expected to boost growth in 2024, at the expense of a further deterioration of fiscal and external accounts and Iraq’s vulnerability to oil price fluctuations. Without policy adjustment, the risk of medium-term sovereign debt stress is high and external stability risks could emerge. Key downside risks include much lower oil prices or a spread of the conflict in Gaza and Israel. A fiscal adjustment is needed to stabilize debt over the medium term while protecting critical social and capital spending. Large savings can be attained from containing the outsized public wage bill and policy measures aimed at mobilizing additional non-oil revenues. Private sector development and economic diversification are crucial to ensure long-term external sustainability and foster private job creation.
Keywords:
governance reform; governance improvement; decarbonization pathway; Iraq's governance framework; CBI bill; Oil prices; Fiscal stance; Global; Middle East; North America
Cover IMF Staff Country Reports
Iraq: Selected Issues
International Monetary Fund. Middle East and Central Asia Dept.
This Selected Issues paper offers a roadmap for tax policy measures and structural reforms that could be used to raise non-oil revenues. In order to raise revenues in the near-term, the authorities should review the tariff structure to eliminate exemptions and raise tariffs on luxuries. There is scope to make the personal income taxes more progressive and broaden tax bases. Raising non-oil revenues is a key priority because of the expected decline in oil prices, as well as the need to ensure long-term fiscal sustainability and meet sizeable spending needs. Over the medium-term, the authorities should move towards adopting the value added tax and tackle structural obstacles to revenue mobilization—informality, lack of economic diversification, low levels of financial inclusion and high reliance on cash. In parallel, the authorities should significantly accelerate institutional reforms of revenue and customs administration with support of IMF and other donor capacity development efforts.
Keywords:
labor market challenge; labor market structure; labor market indicator; C. assessing Drivers; informality distance; Labor markets; Women; Employment; Global; Middle East and Central Asia
Cover Analytical Notes
Towards an Inclusive, Equitable and Sustainable National Pension System in Iraq
International Monetary Fund
,
World Bank
, and
International Labour Office
A pension system is at the heart of social protection. By ensuring income security for older persons and other vulnerable groups, it prevents poverty, reduces inequality, and facilitates consumption smoothing. A pension system also affects the working population’s labor market choices and has important fiscal implications. Iraq’s current pension system is highly fragmented, inequitable, and inefficient. First, it fails to provide adequate income protection to most of Iraqi’s old age population and other vulnerable groups, such as survivors and persons with disability. Second, the public sector pension is already putting substantial pressure on the budget and is potentially unsustainable given the projected acceleration of the total pension bill due to recent policy changes. Third, it sets an uneven playing field between the public and private sectors, contributing to the continued expansion of an already outsized civil service and holding back much-needed economic diversification and private sector growth. Thus, a comprehensive pension reform is urgently needed. Based on collaboration between the IMF, ILO and the World Bank this policy note aims to: 1) Provide an assessment of the existing public and private pension system across the four dimensions: fiscal sustainability; labor market implications; coverage; and adequacy of benefits. 2) Develop and propose options to adjust the pension system with a view to making it fiscally sustainable, more inclusive and adequate, and conducive to private sector development and labor market formalization. 3) Provide a basis to engage key stakeholders—including workers, employers organizations and the civil society—on strategies to achieve a more inclusive system, importantly by including workers in the informal economy, female workers, workers with disabilities, and other disadvantaged groups.
Keywords:
Pension system; Pension Reform; Social protection; Fiscal sustainability; ILO team; scheme reserve; ILO publication; IMF team; member country government; Pension spending; Pensions; Public sector; Aging; Middle East; North Africa; East Africa; Global
Cover IMF Working Papers
Firm-level Digitalization and Resilience to Shocks: Role of Fiscal Policy
Manabu Nose
and
Mr. Jiro Honda
Would digitalization at firm level strengthen firms’ resilience to shocks? And if so, could fiscal policy play any role to promote firm-level digitalization? This paper empirically explores answers to these questions. Based on a local projection method (using the Orbis data covering 1.8 million non-financial firms from 53 countries), we estimate the impacts of aggregate uncertainty shocks on firms’ sales, profit margin, and employment. The findings suggest that uncertainty shocks affect digitalized and less-digitalized firms very differently. Digitalized firms weather shocks better, with smaller drops in sales and profits, while less-digitalized ones are worse off, with long-lasting scars. Then we examine the impact of fiscal interventions to promote firms’ digitalization, using cross-country panel data (covering 64 countries). The result suggests that aligning the tax regime on digital services with general taxation principles and competitive procurement rules on digital products could effectively support the promotion of firm-level digitalization. Overall, our findings point that firm-level digitalization would help strengthen firms’ resilience to a shock, and fiscal interventions can play an important role to promote firm-level digitalization.
Keywords:
Digitalization; Digital divide; Fiscal policy; Global economy; digitalized firm; resilience to shock; firms' digitalization; COVID firm Dynamics; firm-level digitalization; COVID-19; Services sector; Global
Cover IMF Staff Country Reports
Republic of Iraq: Technical Assistance Report on Government Finance Statistics (December 5-19, 2021)
International Monetary Fund. Statistics Dept.
This paper presents the Republic of Iraq’s Technical Assistance report on Government Finance Statistics (GFS) mission. The Ministry of Finance (MOF) has started the implementation of the national budget reform project which is one of the several reform projects prepared in the context of the broader economic reform strategy “the white paper” launched in October 2020. The mission’s objectives were to specifically support the Budget, Public Accounting and Debt Departments in implementing the tasks related to the strategic target on enhancing budget preparation and reporting in line with the Government Finance Statistics Manual 2014 framework and its integration in the Integrated Financial Management Information System. As a critical step to improve the budget classification, the mission supported the MoF in developing a first comprehensive mapping of outlays to Classification of the Functions of Government. The MoF needs to establish an inter-departmental taskforce in charge of GFS compilation. Furthermore, the MoF should initiate a phased approach for expanding institutional coverage of GFS beyond Budgetary Central Government.
Keywords:
Government Finance Statistics Public sector debt statistics Expenditure Public Sector; government finance statistics yearbook; IMF's Statistics Department; Statistics Department of the IMF; staff team of the International Monetary Fund; debt department; Government finance statistics; Budget planning and preparation; Budget execution and treasury management; Chart of accounts; Middle East
Cover IMF Staff Country Reports
Iraq: Selected Issues
International Monetary Fund. Middle East and Central Asia Dept.
This Selected Issues paper assesses Iraq’s national pension system by examining the fiscal burden of budget-financed pensions and providing a sustainability analysis of the contributory pension scheme for public sector workers. It also outlines reform options that can assist the authorities in containing the fiscal burden of the pension system, improving its adequacy, and reducing labor market distortions to remove barriers to private sector growth. The fiscal costs of budget-financed pension schemes are expected to remain elevated. A well-crafted transition plan will be key to the success of pension reforms. A gradual transition to a system with rules that are in line with international social security standards and best practices will loosen political economy constraints. Ensuring that the reform has the buy-in of a large group of stakeholders across the bureaucracy, political leadership and employees will increase credibility and protect it from political pressures during electoral cycles.
Keywords:
electricity sector; gains from Reform; title page; demand management; supply-demand gap; Pension spending; Pensions; Electricity; Public sector; Retirement; Middle East and Central Asia
Cover IMF Staff Country Reports
Iraq: 2022 Article IV Consultation-Press Release; and Staff Report
International Monetary Fund. Middle East and Central Asia Dept.
The 2022 Article IV Consultation discusses that Iraq’s economy has been gradually recovering, supported by strong oil revenues and accommodative policies. Domestic inflation has been contained with the pass-through from high global commodity prices muted by domestic food and fuel subsidies. The near-term outlook is positive with high oil revenues expected to produce fiscal and current account surpluses and growth supported by accommodative fiscal and monetary policies. However, the underlying structural imbalances will likely continue to widen, and in the baseline of gradually declining oil prices, fiscal and external deficits are projected to re-emerge in the medium term. The central bank should closely monitor domestic inflationary pressures and, should they intensify, tighten domestic financial conditions by phasing out its lending initiatives and raising interest rates and reserve requirements. Accelerated efforts are needed to upgrade public financial management, mobilize non-oil revenues, reduce the oversized government payroll, enhance the social safety net, improve the electricity sector’s efficiency, and reduce corruption.
Keywords:
balance of payments; CBI foreign exchange window; CBI governance; METAC mission; inflation risk; CBI auction; oil wealth; oil revenue; CBI website; accommodative policy; Oil prices; Oil; Fiscal stance; Global; Middle East and Central Asia
Cover IMF Working Papers
Estimating Macro-Fiscal Effects of Climate Shocks From Billions of Geospatial Weather Observations
Berkay Akyapi
,
Mr. Matthieu Bellon
, and
Emanuele Massetti
A growing literature estimates the macroeconomic effect of weather using variations in annual country-level averages of temperature and precipitation. However, averages may not reveal the effects of extreme events that occur at a higher time frequency or higher spatial resolution. To address this issue, we rely on global daily weather measurements with a 30-km spatial resolution from 1979 to 2019 and construct 164 weather variables and their lags. We select a parsimonious subset of relevant weather variables using an algorithm based on the Least Absolute Shrinkage and Selection Operator. We also expand the literature by analyzing weather impacts on government revenue, expenditure, and debt, in addition to GDP per capita. We find that an increase in the occurrence of high temperatures and droughts reduce GDP, whereas more frequent mild temperatures have a positive impact. The share of GDP variations that is explained by weather as captured by the handful of our selected variables is much higher than what was previously implied by using annual temperature and precipitation averages. We also find evidence of counter-cyclical fiscal policies that mitigate adverse weather shocks, especially excessive or unusually low precipitation episodes.
Keywords:
climate; extreme weather; macro economy; big data; weather variable; weather shock; OLS estimation outcome; climate variable; weather data sources; Natural disasters; Climate change; Global; Middle East; Sub-Saharan Africa; East Asia; East Africa; GDP effect; weather observation
Cover IMF Staff Country Reports
Iraq: Technical Assistance Report-Customs Valuation, Rules of Origin and Tariff Classification of Goods
International Monetary Fund. Fiscal Affairs Dept.
This report summarizes key findings and recommendations from a remote technical assistance (TA) assignment performed by a short-term expert (STX), Mr. Djamel Bouhabel, from January 17 to February 4, 2021, to the General Customs Authority of Iraq (GCA). The main objective of the TA was to advise GCA on the development and effective application of customs assessment processes based on international standards and best practices.
Keywords:
Customs valuation audit process; World Bank staff; clearance audit; preferential rule; GCA staff; import goods classification; customs import declaration; Valuation; origin and classification; Tax administration core functions; Imports; Customs procedures; Post-clearance customs audit; Global
Cover Policy Papers
The International Architecture for Resolving Sovereign Debt Involving Private-Sector Creditors—Recent Developments, Challenges, And Reform Options
International Monetary Fund
There have been significant developments in sovereign debt restructuring involving private-sector creditors since the IMF’s last stocktaking in 2014. While the current contractual approach has been largely effective in resolving sovereign debt cases since 2014, it has gaps that could pose challenges in future restructurings.
Keywords:
PP; exchange offer; sovereign bond; debt transparency; vulture fund debt speculation; restructuring negotiations; debt restructuring; domestic law; debt service; foreign currency; enhanced CACS; debt management; secondary market; Bonds; International bonds; Sovereign debt restructuring; Debt restructuring; Sovereign bonds; Asia and Pacific