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Asia and Pacific > India

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Cover Selected Issues Papers
Rice Production in Madagascar: Challenges to Self-Sufficiency
VAISHALI ASHTAKALA
,
Joanne Tan
,
Timila Dhakhwa
, and
Yipei Zhang
The Malagasy government aims for self-sufficiency in rice production by 2027, targeting 6 million tons in 2024 and 11 million tons by 2030. Despite recent production increases, challenges such as competition from cheaper imports, low productivity, and climate change persist. This paper analyzes the impact of import competition on local markets, utilizing historical data on tariffs and VAT. It assesses potential rice output under various scenarios and discusses strategies for enhancing productivity sustainably. Findings indicate significant room for improvement in rice yields, highlighting the need for targeted supply-side policies to bolster local production without adversely affecting prices.
Keywords:
Rice production; hybrid seeds; agriculture productivity; food security; rice yield; rice cultivation; countries yield; rice demand and supply; self-sufficiency Republic of Madagascar; Agricultural commodities; Agricultural prices; VAT exemptions; Climate change; Natural disasters; Global; East Africa; Africa
Cover IMF Working Papers
Fiscal Determinants of Domestic Sovereign Bond Yields in Emerging Market and Developing Economies
Manabu Nose
and
Jeta Menkulasi
Domestic sovereign bonds have become a growing source of government financing in Emerging Market and Developing Economies (EMDEs). This paper investigates the role of fiscal policies in determining domestic bond yields, and how this relationship varies depending on the debt structure. Specifically, the analysis highlights the interaction of fiscal policy with banking sector leverage and foreign investor holdings for government debt. A 1 percentage point increase in expected primary deficits results in a persistent increase in 10-year domestic bond yield by around 36 basis points over 2.5 years, with larger effects observed during the COVID-19 pandemic. This contrasts with external bond spreads which are more sensitive to external and global risk factors. The greater the reliance on domestic banks for deficit financing, the stronger the impact of loose fiscal policy on domestic bond yields. The shift in domestic debt financing towards domestic banks after the pandemic implies that sovereign yields have been increasingly interlinked with domestic banks’ investment behavior implying potential financial sector risks in major EMDEs.
Keywords:
Domestic bond yield; Fiscal discipline; Sovereign-bank nexus; Doom-loop; Debt holder composition; sovereign bond bond yield; holder composition; debt structure; debt composition; IMF working paper 25/59; forward rate; Yield curve; Bond yields; Sovereign bonds; Domestic debt; Global
Cover IMF Staff Country Reports
Republic of Madagascar: Selected Issues
International Monetary Fund. African Dept.
This Selected Issues paper explores the electricity sector and Jiro sy rano Malagasy (JIRAMA) in Republic of Madagascar. JIRAMA’s production is relatively inefficient as the company produces less than what is generally acceptable, and at a higher cost. Electricity is the second biggest constraint to competitiveness reported by businesses in Madagascar, based on the Enterprise Survey conducted by the World Bank. A recovery plan is currently under preparation by the new JIRAMA management. While a first objective is for JIRAMA to reach financial sustainability and no longer be dependent on government transfers, other important objectives relate to electricity access and a shift of the production mix toward more renewables. The expansion of production capacity should take place through an increase in renewable energy to reach 85 percent of the production mix. Tariffs should be in line with recovery costs, including operational, distribution, commercialization, and investment costs. A first-best approach is to have one single household tariff and compensate most vulnerable households with targeted transfers.
Keywords:
rice production; teacher training; FRAM teacher; Education sector; rice yield in Madagascar; Agricultural commodities; Electricity; Labor force participation; Sub-Saharan Africa; Africa; Global; East Africa
Cover IMF How To Notes
Comment concevoir et mettre en œuvre des réformes de l’impôt sur la propriété
Martin Grote
and
Jean-François Wen
L’impôt sur la propriété est souvent une source sous-exploitée de recettes publiques locales. Dans de nombreux pays, un impôt à large assiette, perçu à des taux raisonnables, pourrait générer des recettes nettement plus élevées et couvrir la majeure partie des coûts liés à l’amélioration des services publics locaux. La présente note offre un guide pratique pour la conception et la mise en œuvre de réformes des impôts périodiques sur la propriété immobilière et la mutation de biens immobiliers. Elle aborde les choix fondamentaux qu’ont à faire les décideurs sur l’assiette et le taux de l’impôt sur la propriété, ainsi que les principales fonctions de l’administration fiscale dans la gestion de la perception de l’impôt : évaluation, facturation et recouvrement. Les conseils contenus dans cette note découlent d’une analyse documentaire et des connaissances tirées de l’expérience du département des finances publiques dans le renforcement des capacités en matière d’impôt sur la propriété. La note reprend et met à jour certains des travaux d’analyse de Norregaard (2013) tout en fournissant des conseils plus détaillés sur les aspects pratiques de l’adoption de réformes de l’impôt sur la propriété. Elle a été rédigée dans le but d’assister les pays en développement à répondre à leurs besoins en matière de mobilisation des ressources, mais les aspects liés à la conception sont également pertinents pour les pays avancés et les pays émergents qui cherchent à accroître la productivité des recettes de l’impôt sur la propriété.
Keywords:
impôt sur la propriété; impôt foncier; impôt périodique; biens immobiliers; impôt sur la mutation de biens immobiliers; réforme de l’impôt; mise en œuvre de réformes de l’impôt sur la propriété; perception de l’impôt sur la propriété; identité des recettes; gestion de l’impôt sur la propriété; système d’impôt sur la propriété; fonctions essentielles de l’administration fiscale; impôt sur les transactions immobilières; droits de succession; Afrique
Cover IMF Staff Country Reports
India: Financial Sector Assessment Program-Financial System Stability Assessment
International Monetary Fund. Monetary and Capital Markets Department
This paper highlights Financial System Stability Assessment report of India’s Financial Sector Assessment Program (FSAP). India’s financial system has withstood the pandemic well and has become more resilient since the 2017 FSAP. Nonbank financial institutions—especially nonbank financial companies (NBFCs) providing credit with wholesale financing—and market financing have grown, making the financial system more diverse and interconnected. The role of the state has diminished, yet it remains significant, including in using the financial system to pursue social and public finance goals. Banks and NBFCs are generally resilient to severe macrofinancial solvency and liquidity shocks, but some banks, particularly public sector banks, may need to strengthen their capital base to support lending in such situations. The authorities should manage potential systemic risks from concentrated exposures. The regulations of state-owned NBFCs should be aligned with those of the private sector, especially given that state-owned NBFCs are currently exempt from large exposure limits.
Keywords:
market financing; coverage ratio; NBFC liquidity stress test result; policy option; liquidity support; FSAP finding; Financial sector stability; Nonbank financial institutions; Credit; Mutual funds; Anti-money laundering and combating the financing of terrorism (AML/CFT); Global
Cover Technical Assistance Reports
Bhutan: Technical Assistance Report-Development of an Interest Rate Corridor Framework
International Monetary Fund. Asia and Pacific Dept
and
International Monetary Fund. Monetary and Capital Markets Department
In August 2024, at the request of the Royal Monetary Authority of Bhutan (RMA), the IMF South Asia Regional Training and Technical Assistance Center (SARTTAC) conducted a Technical Assistance (TA) mission in Thimphu. The mission aimed to assist the RMA in establishing an interest rate corridor (IRC) and operationalizing related instruments, liquidity forecasting, and collateral frameworks. The mission identified that the RMA lacks necessary monetary policy instruments to effectively address changing systemic liquidity conditions and financial stability challenges. It emphasized the need to move away from reliance on administrative controls, as the absence of appropriate price incentives reinforces the preference for foreign exchange among Bhutanese residents, increasing pressures on the peg. To tackle these issues, the mission proposed a phased approach to introduce the IRC. Initially, relevant external and internal documents should be finalized, followed by mock operations. The first phase involves introducing a one-week main Open Market Operation (OMO), conducted weekly at the policy rate with full allotment. Automatic access to the IRC's standing facilities should be ensured. Later, fixed-quantity, variable-rate OMOs should be utilized, relying on liquidity forecasting to calibrate operations. Additionally, the mission recommended reinstating sweeping arrangements for government accounts and enhancing coordination with the Treasury to improve liquidity forecasting. These measures aim to strengthen the RMA's operational framework and enhance the effectiveness of monetary policy.
Keywords:
Monetary policy; International organization; Bhutan.; RMA money market contact group; IMF South Asia Regional Training and Technical Assistance Center; IMF's Monetary; expert of the IMF Monetary; interest rate corridor framework; Liquidity management; Interest rate corridor; Liquidity; Commercial banks; Central bank policy rate
Cover IMF Staff Country Reports
India: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for India
International Monetary Fund. Asia and Pacific Dept
The 2024 Article IV Consultation discusses that prudent macroeconomic policies have supported India’s economic resilience, with growth expected to recover from a recent softening and inflation expected to converge to target. Risks to the outlook include deepening geoeconomic fragmentation and a slower pace of domestic demand recovery. Policy priorities include continued rebuilding of fiscal buffers, gradual and data-dependent easing of monetary policy, further strengthening of financial resilience, and advancing comprehensive structural policies to invigorate investment, boost the quantity and quality of employment, and raise potential growth. Monetary policy has been broadly appropriate. Systemic financial risks are broadly contained but further reform and vigilant supervision are needed to address remaining pockets of vulnerability. Broad structural reforms are needed to support private investment, job creation, and medium-term growth. Near-term priorities include labor market reform, further reductions in trade restrictions, continuing the public investment push, and providing strong policy frameworks for a stable economic environment.
Keywords:
IMF article; headline inflation; fund approval; gross investment; potential GDP; Anti-money laundering and combating the financing of terrorism (AML/CFT); Capital spending; Global; Eastern Europe
Cover IMF Working Papers
Understanding Agricultural Output in Mozambique: Using remote sensing to initiate a discussion on development
Kelsee Bratley
and
Alexis Meyer-Cirkel
This paper presents a comprehensive analysis of the agricultural land coverage in Mozambique by harnessing advanced remote sensing technologies and draws on successful agricultural development examples to propose strategic pathways for Mozambique. The study leverages Sentinel-2 satellite imagery coupled with a machine learning algorithm to accurately map and assess the country's agricultural land, revealing that agriculture accounts for only 12 percent of Mozambique's land area. By examining the agricultural transformation or “green revolution” that some countries have experienced, it is possible to distill regularities and necessary conditions, which can then be compared to the state-of-affairs in Mozambique. This study not only offers a model of how emerging technologies like remote sensing can inform agricultural state of affairs, it also provides important insights into which concrete bottlenecks are likely to be holding back Mozambique’s agricultural development.
Keywords:
Mozambique; agricultural development; remote sensing; greenrevolution; poverty alleviation; remote sensing technology; satellite imagery; accuracy assessment; agricultural land usage; area estimation; Agricultural sector; Agricultural commodities; Agricultural production; Food security; Global
Cover High-Level Summary Technical Assistance Reports
India - State of Odisha - Public Investment Management Assessment — PIMA and Climate PIMA
International Monetary Fund. Fiscal Affairs Dept.
An IMF team found that the State of Odisha had an overall public investment management (PIM) system that compared well with other emerging market economies, reflecting in particular strong institutions at the execution stage, which have helped the State increase significantly its public investment effort over the last few years. The State also displays some encouraging practices in terms of climate-sensitive PIM. However, several challenges persist and have to do mostly with the first stage (planning, appraisal) and the second stage (maintenance, selection of projects) of the PIM cycle. The team has identified five high-priority recommendations that could improve PIM processes and support the effective implementation of the Government of Odisha’s investment policy and development agenda, including to increase resilience against climate change.
Keywords:
Climate change; Climate policy; Public investment management; Public Investment Management Assessment (PIMA); Public investment spending; India; Odisha; IMF team; PIM process; high-priority recommendation; State action plan; PIM cycle
Cover IMF Staff Country Reports
Australia: Selected Issues
International Monetary Fund. Asia and Pacific Dept
This Selected Issues paper examines monetary policy transmission via three lenses in Australia. The paper finds that while macroeconomic dynamics in Australia in the current tightening cycle have not differed significantly from historical experience and from experiences in other major AEs, the resilience of Australia’s economy in recent years is remarkable, as evidenced by persistently tight labor markets. Second, several features of the Australian housing market, most notably the high prevalence of variable rate mortgages, may strengthen monetary policy transmission to households relative to other AEs. Lastly, we find that firm investment in Australia’s nonextractive sector is strongly sensitive to monetary policy changes; the sensitivity is more pronounced for firms with less liquidity, higher leverage, and higher reliance on bank and short-term financing. We highlight how resilience in Australian corporate balance sheets in recent years may have helped soften monetary policy transmission to investment in the current cycle.
Keywords:
monetary policy shock; heterogeneity in monetary policy TRANSMISSION; industries in Australia; domestic energy transition; fossil fuel demand; Non-renewable resources; Monetary tightening; Renewable energy; Global; Europe