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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.
International Monetary Fund. Western Hemisphere Dept.

Abstract

After successfully weathering a series of shocks, most countries in the region are converging to their (tepid) potential. Growth is expected to moderate in late 2024 and 2025 while inflation is projected to continue easing, although gradually. With output and inflation gaps mostly closed but monetary policy still contractionary and public finances in need of strengthening, a further rebalancing of the policy mix is necessary. Fiscal consolidation should advance without delay to rebuild buffers while protecting priority public investment and social spending. This would support the normalization of monetary policy and strengthen credibility and resilience of policy frameworks. Most central banks are well placed to proceed with monetary easing, striking a balance between fending off the risk of reemerging price pressures and avoiding an undue economic contraction. Medium-term growth is expected to remain close to its low historical average, reflecting long-standing, unresolved challenges—including low investment and productivity growth—and shifting demographics. Worrisomely, the ongoing reform agenda is noticeably thin and could lead to a vicious circle of low growth, social discontent, and populist policies. Avoiding this requires pressing on with reforms. Improving governance—by strengthening the rule of law, enhancing government effectiveness, and tackling crime—is a priority that cuts across all areas of growth. Boosting capital accumulation requires improving the business environment, fostering competition, and increasing international trade. Greater and more effective public investment is also needed. Maintaining a dynamic labor force and increasing productivity requires tackling informality and making formal labor markets more flexible, including to adapt to new technologies. Increasing female labor participation can help boost the labor force and offset demographic shifts.

Augusto Azael Pérez Azcárraga
,
Tadatsugu Matsudaira
,
Gilles Montagnat-Rentier
,
Janos Nagy
, and
R. James Clark

Abstract

Las administraciones de aduanas ven surgir nuevos retos a medida que aumenta el volumen del comercio internacional, aparece nueva tecnología y cambian los modelo de negocio. Este libro analiza los cambios y desafíos que enfrentan las administraciones de aduanas y propone formas de abordarlos. Describe los problemas que las autoridades deben tener en cuenta a la hora de elaborar su propia hoja de ruta para la modernización de las aduanas.

International Monetary Fund. Western Hemisphere Dept.
The 2024 Article IV Consultation discusses that in 2023, Uruguay confronted the impact of a once-in-a-century severe drought and external headwinds, but the economy remained resilient, owing to the authorities’ sound macroeconomic policies, the country’s political stability, and strong institutions. While economic growth decelerated in 2023, employment rose, and inflation fell within the target range. As inflationary pressures cooled off, the Banco Central del Uruguay started lowering its monetary policy rate in April 2023, while maintaining a contractionary stance. The economy is expected to strongly rebound in 2024, underpinned by the recovery of agricultural exports, increased cellulose production, easing of financial conditions and robust private consumption. Main risks are broadly balanced. Overall fiscal and external risks are low. The post-drought growth momentum creates opportunities for reinvigorating fiscal consolidation efforts. The crafting of the next five-year budget law opens an opportunity to recalibrate the fiscal rule targets to place debt on a downward path. Refinements to the fiscal rule would help consolidate recent credibility gains. Monetary policy should remain contractionary to ensure that inflation and inflation expectations stay within the target range in a sustained manner. Structural reforms are key to unlock potential growth, create policy space to preserve the country’s safety net and social cohesion, and support favorable sovereign debt ratings.
Augusto A Perez Azcarraga
,
Tadatsugu Matsudaira
,
Gilles Montagnat-Rentier
,
Janos Nagy
, and
R. James Clark

Abstract

Перед таможенными службами во всем мире встают новые задачи: растущий объем международной торговли, революция в новых технологиях и фундаментальные изменения в бизнес-моделях. Преимущества хорошо функционирующей таможенной администрации очевидны, равно как и необходимость развития эффективных, действенных, справедливых и современных таможенных администраций. Книга «Таможенные вопросы» анализирует многочисленные изменения и проблемы, с которыми сталкиваются таможенные администрации, и предлагают пути их решения. Предлагая разноплановый взгляд на основные аспекты таможенного администрирования, книга служит руководством для директивных органов и должностных лиц таможенных служб при оценке текущего состояния их таможенных систем в целях разработки, совершенствования или продвижения своих планов действий по модернизации таможенной службы.

International Monetary Fund. Monetary and Capital Markets Department
This technical assistance report on Costa Rica discusses the scoping mission on sovereign asset and liability management (SALM). A comprehensive SALM framework can have significant advantages over separate management of sovereign assets and liabilities. It allows analysis of the financial characteristics of the whole balance sheet of the sovereign, identification of sources of costs and risks, and quantification of the correlations among those sources. An analysis of the balance sheet of each entity in Costa Rica’s broader public sector is the first step in developing a consolidated sovereign balance sheet. The balance sheet composition of each entity, or type of entity, is shaped by the nature of its business, historic policy decisions, and the regulatory regime under which it operates. The SALM framework provides insights into the management of liquidity risk. Committee on Sovereign Assets and Liabilities should establish a framework for cash and liquidity management, including a target for a liquidity buffer broken down between individual entities.
International Monetary Fund. Western Hemisphere Dept.
This Selected Issues paper explores fiscal consolidation measures that could generate the savings needed to lower debt. In Uruguay, the authorities’ policies, together with a favorable macroeconomic environment, have led to a decline of the public debt-to-gross domestic product ratio to pre-pandemic levels. Short-term risks are low, and debt is sustainable, yet a sequence of unfavorable shocks such as a prolonged increase in international interest rates and a growth slowdown could lead to further increases in debt. The associated primary balances that would be needed to reach a certain debt level would depend on the assumed transition time. Recent initiatives to focus value-added tax (VAT) exemptions and to reduce rates to recipients of social programs are steps in the right direction to reduce tax expenditures and the regressivity of the tax. An analysis of the structure of revenues and spending suggests possible measures to reduce the fiscal deficit. A reduction of energy subsidies and a full implementation of targeted VAT would increase the efficiency of spending and lead to non-negligible savings.
International Monetary Fund. Western Hemisphere Dept.
This 2023 Article IV Consultation discusses that Uruguay showed strong resilience during the coronavirus disease 2019 pandemic, owing to its high institutional quality, strong governance, and the authorities’ policy responses. Scarring effects in real activity and the labor market were mitigated somewhat by the authorities’ well-targeted responses. The authorities’ strong record of accomplishment of implementing sound macroeconomic policies in a challenging environment has improved the country’s resilience to shocks. The economy is expected to decelerate in 2023. Despite external headwinds, tighter financial conditions, and the impact of the drought, growth would be supported by a strong tourism season, increased cellulose production and exports, and robust private consumption as real wages recover. Fiscal policy plans are appropriate for 2023. After the effect of the drought abates, additional fiscal efforts would be needed to put debt on a firm downward path and rebuild policy space. The tight monetary policy stance is appropriate and should be maintained until inflation and inflation expectations have converged to the target range in a sustained manner.
Augusto Azael Pérez Azcárraga
,
Tadatsugu Matsudaira
,
Gilles Montagnat-Rentier
,
Janos Nagy
, and
R. James Clark

Abstract

Customs administrations around the world face new challenges: an increasing volume of international trade, a revolution in new technologies, and fundamental changes in business models. The benefits of a well-performing customs administration are clear, as is the need to develop efficient, effective, fair, and modern customs administrations. Customs Matters analyzes the many changes and challenges customs administrations face and proposes ways to address them. By offering a cross-sectional view of the main aspects of customs administration, the book guides policymakers and customs officials as they evaluate the current state of their customs system with a view to developing, reinforcing, or relaunching their own roadmaps for customs modernization.

International Monetary Fund. Western Hemisphere Dept.
Uruguay entered the pandemic with solid institutions and social cohesion but growing macroeconomic imbalances—especially slow economic growth and weak public finances—as the end of the last commodity price boom in 2014 uncovered structural weaknesses. A new government came to power in March 2020 with a mandate to boost growth and restore fiscal sustainability. Legislation setting the foundations for many of the reforms has been passed and implementation is advancing––including on a new fiscal rule, and state-owned enterprise (SOE) and pension reforms.