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Collect More, Spend Better: Public Investment in Asian Frontier Markets
Author:
Mr. Manuk Ghazanchyan
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,
Ricardo Marto
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Jiri Jonas
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Kaitlyn Douglass
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Series:
IMF Working Papers
Volume/Issue:
Volume 2017: Issue 010
Language:
English
Publication Date:
24 Jan 2017
DOI:
https://doi.org/10.5089/9781475570892.001
ISBN:
9781475570892
ISSN:
1018-5941
Pages:
36
Keywords:
WP; real GDP; Public Investment; Growth; Debt Sustainability; Fiscal Policy; Revenue Collection; Cambodia; Sri Lanka; Vietnam; investment efficiency; investment program; infrastructure investment; gain parameter; investment profile; investment project; investment efficiency parameter; investment boom; efficiency improvement; investment strategy; investment scenario; investment decision; Public investment spending; Public investment and public-private partnerships (PPP); Tax collection; Asia and Pacific; Global; Southeast Asia; East Asia; Sub-Saharan Africa
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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We use a dynamic small open economy model to explore the macroeconomic impact of alternative public investment scaling-up scenarios, analyzing how improving the efficiency of capital spending and of tax revenue collection affect growth and debt sustainability for three fast-growing Southeast Asian economies: Cambodia, Sri Lanka, and Vietnam. We show that a gradual public investment profile is more favorable than front-loading capital spending because we assume governments are able to gradually learn how to invest more efficiently, accelerating public capital accumulation and therefore growth. We discuss the pros and cons of alternative financing options and identify the financing mix that generates the best macroeconomic outcome. Sometimes overlooked, improving the efficiency of revenue collection over time may ease the burden of fiscal adjustment, achieving higher GDP growth with substantially lower debt-to-GDP ratios, and will help policymakers efficiently meet the challenge of addressing large infrastructure gaps while maintaining debt sustainability.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2017: Issue 010