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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 Technical Assistance Reports
Republic of the Marshall Islands: Technical Assistance Report-Consumption and Income Tax Reform
International Monetary Fund. Fiscal Affairs Dept.
This report provides analysis and advice on tax policy and administration reforms to modernize and improve the income and consumption tax system. On consumption taxes, the key recommendation is to replace the current system that is based on import tariffs, a business turnover tax, and local sales taxes, by a more efficient and equitable system with a broad-based value-added tax, selected excises to address externalities, and a profit tax. On income taxes, the report recommends base broadening and simplifying the rate structure.
Keywords:
Personal income tax; Corporate income tax; Value-added tax; Turnover tax; Republic of the Marshall Islands.; schedule reform option; Marshalls energy company; gross revenue; profit tax; capacity development mission; reform management governance; tax administration issue; income tax reform; administration system; Marshall Islands consumption tax; Tax administration core functions; Consumption taxes; Income and capital gains taxes; Global; Asia and Pacific; Pacific Islands
Cover IMF Working Papers
Strengthening Fiscal Frameworks in the Presence of Rising Risk of Natural Disasters
Olusegun Ayodele Akanbi
,
Jessie Kilembe
, and
Do Yeon Park
This study investigates the impact of rising risk of natural disasters on rule-based fiscal frameworks. It explores the extent to which countries adhere to their fiscal rules in the presence of rising risk of natural disasters. To ensure a consistent analysis, we construct an index measuring the strenghth of fiscal rules, utilizing principal component analysis for a panel of 104 countries. The study employs a panel two-stage least squares estimation method to assess the impact of natural disaster risks on fiscal rules. The results, which are robust across various country groupings, suggest that natural disaster risks play a significant role in the determination of rule-based fiscal framework. After controlling for other determinants, the results show that countries with established fiscal rules are strengthening these rules in response to rising natural disaster risks. Nonetheless, the results are mixed across different country groups, with varying magnitude of impact. This suggests that countries currently operating fiscal rules will need to enhance their efforts to more comprehensively integrate natural disaster risks into their fiscal frameworks.
Keywords:
Fiscal Framework; Fiscal Rules; Natural Disasters; Fiscal sustainability; exposure risk index; natural disaster risk; risk of natural disasters; government climate investment profile; high-ERI country; Fiscal governance; Fiscal risks; Global
Cover IMF Staff Country Reports
Samoa: Selected Issues
International Monetary Fund. Asia and Pacific Dept
2024 Selected Issues
Keywords:
money transfer operator; sectoral risk assessment; Australia labour mobility; transaction report; remittance corridor; risk remittance product; Remittances; Anti-money laundering and combating the financing of terrorism (AML/CFT); Medium taxpayer office; Correspondent banking; Financial sector; Australia and New Zealand; Pacific Islands; Global
Cover Technical Notes and Manuals
A Guide and Tool for Projecting Public Gross Financing Needs
Santiago Acosta Ormaechea
,
Leonardo Martinez
, and
Jorge Restrepo
This guide presents the analytical underpinnings and a manual for the Public Debt Dynamics Tool with Gross Financing Needs (DDT_GFN), an extension of the Public Debt Dynamics Tool (DDT). The DDT projects public debt as percent of GDP under a baseline and alternative scenarios. The DDT_GFN presents debt-to-GDP projections and the corresponding public gross financing needs (GFN)-to-GDP projections for all DDT scenarios, including fan charts for both public debt and GFN. The DDT_GFN also computes fiscal adjustment paths for a user defined GFN target and adjustment period. Twelve often publicly available macrofiscal variables are needed to perform a rich analysis of public debt and GFN dynamics. The DDT_GFN was developed by the IMF Institute for Capacity Development to be used for its capacity development work on macroeconomic frameworks for forecasting and policy analysis.
Keywords:
Public gross financing needs; public debt dynamics; local- and foreign-currency debt; fiscal adjustment paths; Public Debt Dynamics Tool; DDT; DDT_GFN; dynamics tool; data input; public debt projection; adjustment scenario; data IMF Library; Fiscal stance; Foreign currency debt; Local currency debt; Fiscal consolidation
Cover Selected Issues Papers
How Has Dollarization Served Timor-Leste So Far?
Raju Huidrom
and
Danila Smirnov
This paper analyzes Timor-Leste’s historical economic performance and structure under dollarization. It considers several dimensions that determine the benefits and costs of the regime: (i) growth and inflation performance; (ii) business and financial cycle synchronization; (iii) adjustment to external shocks; and (iv) competitiveness. Dollarization has helped Timor-Leste achieve relatively low and stable inflation in the context of post conflict fragility, but may be contributing to weakening competitiveness. Improved performance under dollarization requires reduced fiscal imbalances and advancement of reforms that address structural bottlenecks that also undermine competitiveness.
Keywords:
Dollarization; business cycles; competitiveness; I. data description; inflation performance; Asia-Pacific department; weakening competitiveness; structure under dollarization; Inflation; Real effective exchange rates; Global
Cover IMF Staff Country Reports
Democratic Republic of Timor-Leste: Selected Issues
International Monetary Fund. Asia and Pacific Dept
This Selected Issues paper analyzes Timor-Leste’s historical economic performance and structure under dollarization. It considers several dimensions that determine the benefits and costs of the regime: (1) growth and inflation performance; (2) business and financial cycle synchronization; (3) adjustment to external shocks; and (4) competitiveness. Dollarization has helped Timor-Leste achieve relatively low and stable inflation in the context of post conflict fragility, but may be contributing to weakening competitiveness. The severe overvaluation of the real effective exchange rate, following a series of external shocks in the past 10 years may be a contributing factor in addition to the structural bottlenecks that constrain the development of the private sector. While the choice of currency regime lies with the authorities, progress at addressing these challenges, as well as building technical capacity at the central bank, and improving the regulatory and legal framework for the financial system, should be seen as both important reforms to strengthen the economy’s performance under dollarization as well as pre-requisites before consideration is given to the introduction of a national currency.
Keywords:
I. data description; copyright page; trade linkage; trading partners; headline inflation in Timor-Leste; oil price shock; Timor-Leste's adjustment; Timor-Leste's business cycle; Dollarization; Inflation; Real effective exchange rates; Exchange rate arrangements; Global
Cover Technical Notes and Manuals
Understanding Artificial Intelligence in Tax and Customs Administration
Joshua Aslett
,
Stuart Hamilton
,
Ignacio Gonzalez
,
David Hadwick
, and
Michael A Hardy
This technical note provides an overview of current thinking on artificial intelligence (AI) in tax and customs administration. Written primarily for senior officials, the intent of the note is to provide an awareness of AI that can help inform decision making and planning. The note opens with an exploration of historic and ongoing AI developments. It then provides an overview of legal and ethical concerns, AI use cases, guidance on how to promote AI's responsible use, and logic for introducing AI use cases into an operational setting. The note closes by presenting a selection of questions being debated by experts. In its annexes, the note includes (1) an example of an AI policy; (2) references to help develop AI strategy; and (3) methodology to risk assess AI use cases.
Keywords:
tax administration; customs administration; artificial intelligence; generative artificial intelligence; AI regulation; strategy and planning; use case; AI strategy; understanding AI; AI Policy; risk assessment; Tax administration core functions; Customs administration core functions; Training and development in revenue administration; Europe; Global
Cover Departmental Papers
Violent Crime and Insecurity in Latin America and the Caribbean: A Macroeconomic Perspective
Paul M Bisca
,
Vu Chau
,
Paolo Dudine
,
Raphael A Espinoza
,
Jean-Marc Fournier
,
Pierre Guérin
,
Niels-Jakob H Hansen
, and
Jorge Salas
Violent crime and insecurity remain major barriers to prosperity in Latin America and the Caribbean (LAC). With just 8 percent of the global population, LAC accounts for a third of the world’s homicides. Building on the existing literature, this paper aims to support economic policymakers and development partners by exploring the interplay between insecurity and macroeconomic outcomes, with emphasis on the relationship between violent crime and growth, the business climate, and public finances. The analysis shows that national-level crime indicators mask huge internal disparities, and that municipalities with 10 percent higher homicide rates have lower economic activity by around 4 percent. The paper develops an innovative measure of insecurity—the share of crime-related news—and shows its association with lower industrial production. Using firm-level data, it also estimates that the direct costs of crime, for firms, are around 7 percent of annual sales, and these are much higher when gangs and drug-trafficking organizations are present. Violent crime rises with macroeconomic instability, inequality, and governance problems. Using a large cross-country panel, the analysis finds that homicides increase when a country is affected by negative growth, high inflation, or a worsening of inequality. Victimization surveys indicate that where populations are concerned with the rule of law—impunity and police corruption—only one in five victims file their case with the police. Lack of trust and crime can be mutually reinforcing. Finally, the paper documents the fiscal burden of security provision and finds that spending tends to be inelastic to crime and that spending efficiency could be improved. The paper concludes with policy lessons and areas for additional collaboration between national authorities, international partners, and key stakeholders. These focus on data collection and analysis, economic policies that may address the root causes and manifestations of crime, strengthening rule of law institutions, and intensifying regional exchanges on security and public finance issues.
Keywords:
Crime; organized crime; homicides; homicide dates; costs of crime; macroeconomic stability; growth; drivers of crime; crime impunity; private sector development; violent crime; crime indicator; development in Latin America and the Caribbean; Public order and safety spending; Drug trafficking; Caribbean; Central America; South America; Global
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