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Business and Economics > Public Finance

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Cover IMF Staff Country Reports
El Salvador: Request for Extended Arrangement Under the Extended Fund Facility-Press Release; Staff Report; and Statement by the Executive Director for El Salvador
International Monetary Fund. Western Hemisphere Dept.
El Salvador has recovered well from the pandemic, supported by robust remittances and buoyant tourism flows, amid a sharp improvement in the country’s security situation. Inflation has fallen and the external imbalances have narrowed more recently, consistent with a gradual improvement in public finances and favorable terms of trade. In this context, sovereign spreads have come down sharply with recent debt buyback operations helping to ease near-term external financing needs. Despite recent progress, El Salvador’s macroeconomic imbalances remain significant, stemming from high fiscal deficits and debt, as well as low external and financial buffers, in the context of dollarization. Meanwhile, underlying productivity remains low, reflecting in part persistent social and infrastructure gaps, as well as a legacy of weak governance and transparency, which have discouraged investment. The Bukele administration is intent on focusing its second mandate on addressing pending macroeconomic and structural challenges and boosting economic growth, under an IMF-supported program.
Keywords:
audited financial statements; staff appraisal; publication of asset declaration; list of statement; Bitcoin transparency; Public sector; Anti-money laundering and combating the financing of terrorism (AML/CFT); Pension spending; Central America; Caribbean; Global
Cover IMF Staff Country Reports
Qatar: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Qatar
International Monetary Fund. Middle East and Central Asia Dept.
Growth normalization after the 2022 FIFA World Cup continued with signs of activities strengthening more recently. Fiscal and external surpluses softened mainly due to lower hydrocarbon prices. Banks are healthy but pockets of vulnerabilities remain. Reform momentum has strengthened, guided by the Third National Development Strategy (NDS3).
Keywords:
Qatar national; holdings of SDR; Qatari economy well; headline inflation; hydrocarbon price; Anti-money laundering and combating the financing of terrorism (AML/CFT); Public sector; Capital spending; Global
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 Working Papers
Government Debt and Growth: The Role of R&D
Can Sever
Economic growth in the advanced economies (AEs) has been slowing down since the early 2000s, while government debt ratios have been rising. The recent surge in debt at the onset of the Covid-19 pandemic has further intensified concerns about these phenomena. This paper aims to offer insight into the high-debt low-growth environment in AEs by exploring a causal link from government debt to future growth, specifically through the impact of debt on R&D activities. Using data from manufacturing industries since the 1980s, it shows that (i) government debt leads to a decline in growth, particularly in R&D-intensive industries; (ii) the differential effect of government debt on these industries is persistent; and (iii) more developed or open financial systems tend to mitigate this negative impact. These findings contribute to our understanding of the relationship between government debt and growth in AEs, given the role of technological progress and innovation in economic growth.
Keywords:
Government debt; fiscal policy; economic growth; R&D; innovation; financial development; economic growth in the advanced economies; R&D activity; impact of debt; debt level; affect tax dynamics; Financial sector development; Manufacturing; Productivity; Aging; Global
Cover IMF Staff Country Reports
Bolivia: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Bolivia
International Monetary Fund. Western Hemisphere Dept.
Economic activity has slowed reflecting falling natural gas production, lower public investment execution, financial volatility, and disruptions due to socio-political tensions. Bolivia’s inflation rate remains one of the lowest in the region, sustained by price controls and costly subsidies. The combination of sizable fiscal imbalances, declining natural gas exports, a loss of access to international markets, and the ongoing monetization of the deficit in the context of an exchange rate peg have eroded competitiveness, depleted reserves, and left Bolivia in a precarious position.
Keywords:
market exchange rate volatility; authorities' action; U.S. dollar; Bolivian authorities; government's measure; Public sector; International reserves; Inflation; Global; Caribbean
Cover IMF Working Papers
Social Security Reforms, Retirement and Sectoral Decisions
Bruno R. Delalibera
,
Pedro Cavalcanti Ferreira
, and
Rafael Machado Parente
In many countries, the regulations governing pension systems, hiring procedures, and job contracts differ between the public and private sectors. Public sector employees tend to have longer tenures and higher wages compared to workers in the private sector. As such, social security reforms can affect both retirement decisions and sectoral choices. We study the effects of social security reforms on retirement and sectoral behavior in an economy with multiple pension systems. We develop a general equilibrium life-cycle model with heterogeneous agents, three sectors - private formal, private informal and public - and endogenous retirement. We quantitatively assess the long-run effects of reforms being discussed and implemented around the world. Among them, we study the unification of pension systems and increasing the minimum retirement age. We calibrate our model to Brazil, where several of the retirement conditions resemble those of other countries. We find that these reforms lower the likelihood of individuals to apply to a public job and increase the profile of savings over the life cycle. In the long run, these reforms lead to higher output and capital, reduced informality, and average welfare gains. They also drastically reduce the social security deficit.
Keywords:
Social security reform; Public employment; Public deficit; Informality; reform experiment; retirement condition; social security deficit; retirement decision; Retirement; Aging; Public sector; East Asia; Global
Cover IMF Working Papers
Designing Expenditure Policy Conditionality in IMF-Supported Programs
Emine Hanedar
and
Zsuzsa Munkacsi
This gap-filling paper provides granular advice on how to design quantitative and structural conditionality of IMF-supported programs in six expenditure policy areas: social assistance, energy subsidies, pension spending, health spending, education spending, and wage bill management. Such granular advice is based on a stocktaking exercise: an analysis of 105 programs approved between 2002 and July 2021 containing a ca. 1400 conditions. Conditions are key to identify outcomes or actions seen as critical for program success or monitoring, and so are essential for financial support countries can receive from the Fund.
Keywords:
IMF-supported programs; conditionality; expenditure policy; social assistance; energy subsidies; pension spending; health spending; education spending; wage bill management; policy conditionality; policy area; IMF working papers; reform plan; E. public health spending; Health care spending; Caribbean; North Africa; Middle East; East Africa; Europe
Cover IMF Staff Country Reports
The Bahamas: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for The Bahamas
International Monetary Fund. Western Hemisphere Dept.
Activity has recovered to its pre-pandemic level and inflation is now modestly negative. Public finances are improving and borrowing costs have declined. Nonetheless, public debt remains high and its short duration represents an important vulnerability.
Keywords:
CARTAC CARTAC; Bahamian authorities; revenue-enhancing strategy; CARTAC FAD; energy reform plan; Anti-money laundering and combating the financing of terrorism (AML/CFT); External sector statistics; Caribbean; Global
Cover IMF Working Papers
The Macroeconomic and Welfare Benefits of Building Resilience in Disaster-Prone Developing Countries
Yehenew Endegnanew
,
Rafael D Goncalves
,
Samuel Mann
,
Marina Mendes Tavares
, and
Harold Zavarce
Natural disasters often have high economic costs, setting back years of investment in developing countries. This paper develops a multi-sector DSGE model to study the macroeconomic and welfare implications of financing resilience-building using different fiscal instruments. The model includes developing countries’ macroeconomic and distributional features, such as a large unproductive rural sector, an incomplete credit market, and an informal sector. The results indicate that investing in resilience capital in a disaster-prone country improves welfare despite its high economic cost, but the financial instrument used to mobilize revenue matters.
Keywords:
Resilient investment; natural disasters; macroeconomics; fiscal sustainability.; implications of financing resilience-building; resilient capital; welfare implication; revenue matter; credit market; Human capital; Consumption; Energy sector; Global
Cover IMF Staff Country Reports
Democratic Republic of São Tomé and Príncipe: Request for an Arrangement Under the Extended Credit Facility-Press Release; Staff Report; and Statement by the Executive Director for Democratic Republic of São Tomé and Príncipe
International Monetary Fund. African Dept.
The people of São Tomé and Príncipe (STP), a small fragile island state, have faced extraordinary challenges. STP continues to struggle with high fuel import needs, limited export potential, and depleted international reserves, and faced a massive balance of payments (BOP) shock in early 2023, which opened a large external financing gap. Inflation was stubbornly high in 2023 and the economy barely grew, dragged down by foreign exchange and energy shortages, as well as a large fiscal adjustment. Growth is projected to remain sluggish in 2024, while inflation has started to decline.
Keywords:
tariff structure; staff appraisal; fuel price adjustment mechanism; electricity tariff; ECF arrangement; Arrears; Debt sustainability; Imports; Global; West Africa; Europe