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Africa > Malawi

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Cover Technical Assistance Reports
Malawi: Technical Assistance Report-Report on the Improving Estimates of Gross Domestic Product Mission (June 24–July 5, 2024)
International Monetary Fund. Statistics Dept.
The mission assisted the National Statistical Office of Malawi improve the quality of the published annual estimates of Gross Domestic Product (GDP), progressed the use of Value Added Tax (VAT) data as a basis for developing quarterly series and supported development of current price estimates of GDP based on the expenditure approach (GDP-E). Specially, the mission reviewed the quality of the published GDP series and finalized Supply and Use Tables for 2017. This allowed the development of annual current price estimates of GDP-E. In addition, the mission initiated estimation of quarterly current price estimates of GDP for some activities based on data for company sales from Malawi’s VAT system.
Keywords:
GDP; Supply and Use Tables; expenditure GDP; quarterly GDP; administrative data; value added tax; Malawi.; business processing documentation; STA Department; estimates of GDP-E; consumption expenditure; VAT data; Value-added tax; Consumer price indexes; Gross fixed investment
Cover IMF Working Papers
Tax Revenues in Fragile and Conflict-Affected States—Why Are They Low and How Can We Raise Them?
Mr. Bernardin Akitoby
,
Mr. Jiro Honda
, and
Keyra Primus
Raising revenues has been a formidable challenge for fragile and conflict-affected states (FCS), a fact confirmed once again in the COVID-19 crisis. Nonetheless, achieving sizable gains in tax collection in fragile environments is not impossible. This paper—with empirical analyses and case studies—contributes to policy discussions on tax reform in such challenging environments. Our analyses show that many FCS achieved some recovery of tax revenues, even though they found it challenging to sustain the momentum beyond three years. We also find that changes in the quality of institutions (e.g., government effectiveness and control of corruption) are a key contributory factor to their tax performance (much more so than for non-FCS). Next, we look into the tax increase episodes of four countries (Liberia, Malawi, Nepal, and the Solomon Islands). Although each FCS is unique, their experiences suggest two lessons: (i) tax reforms can be pursued even with initially weak institutions; and (ii) strong political commitment is important to sustain reform efforts and realize long-lasting, sizable gains.
Keywords:
WP; customs administration reform; reform effort; modernization program; governance issue; revenue administration reform; tax administration modernization program; income tax; tax reform; country authorities; tax administration reform; customs duty; tax reform strategy; governance variable; effectiveness index; Tax administration core functions; Tax collection; Customs administration core functions; Excises; Middle East; Sub-Saharan Africa; Global; Tax Revenue Mobilization; Fragile; Conflict-Affected States; government effectiveness; administration reform
Cover Staff Discussion Notes
Macro-Structural Policies and Income Inequality in Low-Income Developing Countries
Ms. Stefania Fabrizio
,
Davide Furceri
,
Mr. Rodrigo Garcia-Verdu
,
Ms. Grace B Li
,
Mrs. Sandra V Lizarazo Ruiz
,
Ms. Marina Mendes Tavares
,
Mr. Futoshi Narita
, and
Adrian Peralta
Despite sustained economic growth and rapid poverty reductions, income inequality remains stubbornly high in many low-income developing countries. This pattern is a concern as high levels of inequality can impair the sustainability of growth and macroeconomic stability, thereby also limiting countries’ ability to reach the Sustainable Development Goals. This underscores the importance of understanding how policies aimed at boosting economic growth affect income inequality. Using empirical and modeling techniques, the note confirms that macro-structural policies aimed at raising growth payoffs in low-income developing countries can have important distributional consequences, with the impact dependent on both the design of reforms and on country-specific economic characteristics. While there is no one-size-fits-all recipe, the note explores how governments can address adverse distributional consequences of reforms by designing reform packages to make pro-growth policies also more inclusive.
Keywords:
SDN; productivity; rate; revenue; Income inequality; growth; macro-structural policies; resource mobilization; infrastructure investment; financial sector reform; financial inclusion; agriculture; cash transfer program; higher-productivity sector; inequality in low-income developing countries; productivity gap; cost of capital; income fluctuation; Value-added tax; Income; Agricultural sector; Income distribution; Caribbean
Cover IMF Working Papers
How Buoyant is the Tax System? New Evidence from a Large Heterogeneous Panel
Mr. Paolo Dudine
and
João Tovar Jalles
In this paper we provide short- and long-run tax buoyancy estimates for 107 countries (distributed between advanced, emerging and low-income) for the period 1980–2014. By means of Fully-Modified OLS and (Pooled) Mean Group estimators, we find that: i) for advanced economies both long-run and short-run buoyancies are not different from one; ii) long run tax buoyancy exceeds one in the case of CIT for advanced economies, PIT and SSC in emerging markets, and TGS for low income countries, iii) in advanced countries (emerging market economies) CIT (CIT and TGS) buoyancy is larger during contractions than during times of economic expansions; iv) both trade openness and human capital increase buoyancy while inflation and output volatility decrease it.
Keywords:
WP; tax buoyancy; tax revenue; buoyancy estimate; buoyancies help; tax elasticity; recession; error correction model; pooled mean group; short vs long run; fiscal sustainability; buoyancy coefficient; tax category; Corporate income tax; Personal income tax; Inflation; Emerging and frontier financial markets; Global
Cover IMF Working Papers
Debt Sustainability, Public Investment, and Natural Resources in Developing Countries: the DIGNAR Model
Mr. Giovanni Melina
,
Ms. Susan S. Yang
, and
Luis-Felipe Zanna
This paper presents the DIGNAR (Debt, Investment, Growth, and Natural Resources) model, which can be used to analyze the debt sustainability and macroeconomic effects of public investment plans in resource-abundant developing countries. DIGNAR is a dynamic, stochastic model of a small open economy. It has two types of households, including poor households with no access to financial markets, and features traded and nontraded sectors as well as a natural resource sector. Public capital enters production technologies, while public investment is subject to inefficiencies and absorptive capacity constraints. The government has access to different types of debt (concessional, domestic and external commercial) and a resource fund, which can be used to finance public investment plans. The resource fund can also serve as a buffer to absorb fiscal balances for given projections of resource revenues and public investment plans. When the fund is drawn down to its minimal value, a combination of external and domestic borrowing can be used to cover the fiscal gap in the short to medium run. Fiscal adjustments through tax rates and government non-capital expenditures—which may be constrained by ceilings and floors, respectively—are then triggered to maintain debt sustainability. The paper illustrates how the model can be particularly useful to assess debt sustainability in countries that borrow against future resource revenues to scale up public investment.
Keywords:
WP; natural resource; Natural resources; Public Investment; Debt Sustainability; Small Open DSGE Models; DIGNAR; Developing Countries; investment path; scaling-up investment target; investment efficiency; investment adjustment cost parameter; investment approach; investment scaling-up path; resource revenue; Public investment spending; Commercial borrowing; Consumption taxes; Sub-Saharan Africa; Africa
Cover IMF Working Papers
Does Import Protection Discourage Exports?
Mr. Stephen Tokarick
This paper points out that while many developing countries seek to increase their export earnings, they have not embraced fully the notion that their own pattern of import protection hurts their export performance. The paper quantifies the extent to which import protection acts as a tax on a country's export sector and finds that for many developing countries, the magnitude of the implicit tax is substantial-about 12 percent, on average, for the countries studied. The paper also illustrates the effects of various tariff-cutting scenarios in the Doha Round on export incentives and concludes that, in general, developing countries could increase their export earnings by reducing their own import tariffs, but countries must be careful about how these tariff reductions are achieved. For example, tariff-cutting schemes that exempt certain sectors could actually be harmful.
Keywords:
WP; export; tariff; import; developing country; import tariff; Tariffs; export tax; welfare; restrictiveness; export-tax equivalent; tariff barrier; export disincentive; anti-export bias; Exports; Imports; Trade barriers; Export prices; Africa
Cover IMF Staff Country Reports
Malawi: Selected Issues and Statistical Appendix
International Monetary Fund
This Selected Issues paper estimates the path of the equilibrium real exchange for Malawi. Based on a dynamic model of a small open economy, the paper identifies and discusses the dynamics between certain fundamental variables and the real exchange rate. It also investigates the presence of a long-term relationship between the real exchange rate and the explanatory variables, and estimates both the equilibrium real exchange rate and the speed at which it converges toward its equilibrium level. The paper also discusses episodes of discrepancies between the real effective exchange rate and its equilibrium level.
Keywords:
ISCR; CR; Malawi; export; standard error; Malawi equilibrium exchange rate; CCA system; expenditure management; withholding tax; Income and capital gains taxes; Personal income tax; Income tax systems; Real exchange rates; Sub-Saharan Africa; Africa
Cover IMF Staff Country Reports
Malawi: Selected Issues and Statistical Appendix
International Monetary Fund
This report highlights the growth and macroeconomic policies in Malawi, and also analyzes the interaction between aid flows and macroeconomic stabilization policy. The paper reviews the country's recent trade reform program and summarizes other associated reforms and changes in the pattern of trade. It provides a survey of selected studies on the direct impact of HIV/AIDS on mortality and morbidity, measures of their possible effects on output, growth, and the fiscal position, and also a statistical appendix is provided for the country.
Keywords:
ISCR; CR; reform program; foreign exchange; per capita income; trade agreement; trade regime; trade reform program; growth performance; trade liberalization program; aid dependency-a; tariff structure; economic growth; Malawi tea estate; Tariffs; Exports; HIV and AIDS; Aid flows; Imports; Africa; Sub-Saharan Africa; Southern Africa; East Africa
Cover Revenue Implications of Trade Liberalization
Revenue Implications of Trade Liberalization
Mr. Reint Gropp
,
Mr. Liam P. Ebrill
, and
Ms. Janet Gale Stotsky

Abstract

The apparent contradiction between trade liberalization and continuing high trade tax revenue raises the important question of how, precisely, the one affects the other. Although policymakers generally recognize the long-term benefits of trade liberalization, some have argued for at least a slower pace, in part because of revenue concerns. This paper seeks to address these issues in three complimentary ways: through an overview of the factors that may have a bearing on the question, through a review of trends in trade tax revenue both globally and in selected countries, and through econometric analysis.

Keywords:
OP; liberalization; trade; tax; reform; trade reform; tariff rate; trade liberalization; trade tax; liberalization process; Tariffs; Taxes on trade; Trade liberalization; Imports; Western Hemisphere; Africa; Asia and Pacific; Middle East; Central Africa
Cover IMF Working Papers
Coordinating Tariff Reduction and Domestic Tax Reform
Mr. Michael Keen
and
Ms. Jenny E Ligthart
A key obstacle to fundamental tariff reform in many developing countries is the revenue loss that it ultimately implies. This paper establishes a simple and practicable strategy for realizing the efficiency gains from tariff reform without reducing public revenues, showing that for a small open economy, a cut in tariffs combined with a point-for-point increase in domestic consumption taxes increases both welfare and public revenues. Increasingly stringent conditions are required, however, to ensure unambiguously beneficial outcomes from this reform strategy when allowance is made for such important features as nontradeable goods, intermediate inputs, and imperfect competition.
Keywords:
WP; production efficiency; tariff reform; tax reform; intermediate inputs; imperfect competition; reform of the kind; tariff revenue; tariff reduction; revenue function; reform literature; tax-tariff reform; reform design; reducing tariff; Tariffs; Consumption taxes; Consumer prices; Producer prices; Consumption; Africa