Abstract
The 2018 Annual Report of the IMF Committee on Balance of Payments Statistics provides an overview of trends in global balance of payments statistics.
Fractious domestic politics are at the root of continued poverty in some developing countries and pose a dilemma for donors and international financial institutions. This paper examines the effects of foreign assistance in countries with plentiful investment opportunities when interest groups compete for unproductive government transfers. We assess conditional and unconditional assistance (project and program aid, loans, and grants). We find that project conditionality alone may fail to spur growth. Official development loans channeled to investment may not increase the recipient’s growth and welfare even if interest groups are unable to appropriate aid funds directly. Conditions must tackle the domestic drivers of inefficient fiscal policies. To improve the composition of government expenditure, increase growth, and improve welfare, tax rates must be kept constant and loan repayment be financed by cuts in unproductive transfers. Official development grants are superior to loans of the same net present value if donors cannot enforce conditions on assistance.
In recent months, prices of oil, nickel, tin, corn, and wheat have hit record highs, building on dramatic increases since their lows of 2000. What does this mean for sub-Saharan Africa, a highly diverse region of net commodity importers and exporters?
The IMF is working with vulnerable member countries to assess the fiscal, balance of payments, and income effects of higher food prices and of higher commodity prices more generally.
Michael Deppler, head of the IMF’s European Department for the past 11 years, speaks in the following interview about the effects of the subprime crisis on Europe and the IMF’s first multilateral consultation, a high-level initiative aimed at reducing global economic imbalances.
A number of African countries are considering adopting a flexible new policy framework with the IMF that enables them to secure Fund support for, and endorsement of, their economic policies without a borrowing arrangement. Since the new Policy Support Instrument (PSI) was established by the IMF’s Executive Board in October 2005, four countries in Africa—Nigeria, Uganda, Cape Verde, and most recently Tanzania—have adopted it.
Abstract
This study analyzes key issues associated with large increases in aid, including absorptive capacity, Dutch disease, and inflation. The authors develop a framework that emphasizes the different roles of monetary and fiscal policy and apply it to the recent experience of five countries: Ethiopia, Ghana, Mozambique, Tanzania, and Uganda. These countries have often found it difficult to coordinate monetary and fiscal policy in the face of conflicting objectives, notably to spend the aid money on domestic goods and to avoid excessive exchange rate appreciation.