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International Monetary Fund. Strategy, Policy, & Review Department
The global economy has been resilient and appears headed for a soft landing. Inflation continues to recede and risks have become more balanced globally. Nonetheless, medium-term growth prospects remain at the lowest level in decades and a smooth completion of the disinflation process should not be taken for granted. While the outlook for low-income developing countries (LIDCs) is improving, risks are tilted to the downside. The pace of convergence toward higher living standards has slowed, making it increasingly challenging to achieve the Sustainable Development Goals (SDGs). In the last mile of disinflation, central banks should ensure that inflation moves durably to target: they should neither ease policies prematurely nor delay too long and risk causing target undershoot. Fiscal policies need to rebuild budgetary room and ensure debt sustainability. Fostering faster productivity growth and facilitating the green transition are keys to improving long-term growth prospects. Multilateral cooperation is key to enhancing the resilience of the global economy in a more shock-prone world.
Rimjhim Aggarwal, Piergiorgio M Carapella, Tewodaj Mogues, and Julieth C Pico-Mejia
This paper evaluates the additional spending needed to meet core targets of selected Sustainable Development Goals (SDGs) while accounting for the associated cost to address climate risks. The SDGs under study are those related to human and physical capital development. An additional 3.8 percent of global GDP, or US$3.4 trillion, of public and private spending will be required by 2030 to achieve a strong performance in the selected SDGs while addressing associated climate risks. This includes an increase of 0.4 percent of global GDP (US$358 billion) compared to estimates that do not account for mitigation and adaptation needs within these sectors. LIDCs and SSA experience the highest climate-related cost augmentation relative to GDP, while EMEs (driven by large Asian emerging economies) bear the largest cost in absolute terms.
International Monetary Fund. African Dept.
This Selected Issues paper focuses on the costing and financing of social development goals (SDG) in Comoros. Comoros is committed to achieve SDGs, but progress has been limited. This paper uses two models—a costing model and a financing model—to illustrate the large costs of reaching some of the SDGs related to social, human capital and infrastructure by the target year of 2030 and to highlight particular cost drivers. The substantial cost of achieving SDG, 18.8 percent of 2030 gross domestic product, is due to the country’s very low starting point and the inherent difficulties associated with its small size. The persistently very weak domestic resources are another reason for the substantive cost of achieving SDGs. The ongoing commitments of the authorities in the Extended Credit Facility program, with a focus on enhancing domestic revenue mobilization is a key to achieve better outcomes in this area. The fiscal space generated by the program could be both used to restore debt sustainability and to accelerate the achievement of SDGs in Comoros.
Piergiorgio M Carapella, Ms. Tewodaj Mogues, Julieth C Pico-Mejia, and Mauricio Soto
This note provides a technical overview and description of the 3rd edition of the IMF SDG costing tool that estimates the additional spending needs to achieve a strong performance in selected SDGs for human capital development (health and education) and physical capital development (infrastructure), in particular, water and sanitation, electricity, and roads. The 3rd edition includes data and methodological updates to, but generally remains faithful to the original approach described in, Gaspar et al. (2019). Globally, additional spending needed to achieve a strong performance in the selected SDGs in 2030 amounts to US$3.0 trillion (3.4 percent of 2030 world GDP). Estimated at 16.1 percent of 2030 LIDC GDP, the average additional SDG cost of this income group is significantly higher than in EMEs, who face additional spending amounting to 4.8 percentage points of their GDP in 2030. In contrast to EMEs and LIDCs, the additional cost for AEs is low, under 0.2 percent of their 2030 GDP.
International Monetary Fund. Strategy, Policy, & Review Department
The Policy Coordination Instrument (PCI) is a non-financial instrument, designed to help countries demonstrate their commitment to a reform agenda and unlock financing from other sources. It supports countries in designing and implementing a full-fledged macroeconomic program of policies that meet upper credit tranche standards and address imbalances, prevent crises, build buffers, and enhance stability. The PCI is available to all member countries, follows a fixed review schedule, and uses a review-based approach to monitoring conditionality. Based on a stock taking of the experience with the PCI, this review proposed reforms to ensure that the PCI remains fit-for-purpose in today’s complex global economic environment while maintaining its strong signaling function. The review also made the case for eliminating the Policy Support Instrument (PSI), which has been replaced by the PCI as the signaling instrument of choice.
International Monetary Fund. African Dept.
This Selected Issues paper explores development planning, sustainable development goals (SDG) progress, and fiscal space in Angola. Economic diversification and poverty reduction in Angola will require more and better-quality spending on human and physical capital and, thus, greater fiscal space. Spending in these areas has historically been lower relative to lower middle-income country peers, although broadly in line with other SSA countries, and with weak outcomes. Boosting human and physical capital with the goal of economic diversification and poverty reduction in mind will likely be a primary focus of the authorities’ 2023-27 National Development Plan. This paper finds that achieving those goals, as benchmarked by the SDGs, will entail greater and more targeted investment, with the largest spending needs falling around education and health. As such, creating additional fiscal space, following through on the structural fiscal reform agenda, and attracting private investment will all be critical components of improving the level and quality of development spending in Angola.