Back Matter

Appendix I. Costing Methodology

The costing exercise focuses on education, health, and selected areas of infrastructure (roads and water and sanitation). The methodology follows Gaspar and others (2019). The estimations consider Guatemala’s projections for economic growth and demographics. The exercise aims to estimate the cost of inputs needed to support good outcomes in these different sectors, independent of the form of financing. Our estimates account for spending efficiency as high-performing countries used as benchmarks spend more efficiently than other countries in the same income group. Our estimates also account for intersectoral synergies, to the extent that high performers in one sector (such as education) are likely to achieve high outcomes in others (such as health).

Education. We estimate the cost of setting key parameters (teacher salaries, pupils per teachers, and share of non-compensation expenses) in 2030 equal to the median values observed today in good performing countries (those that exceed 80 in the SDG education index) with GDP per capita between $3,000 and $6,000 in 2016.

Health. We estimate the cost of setting key parameters (medical personnel, doctors and other medical personnel per population, share of non-compensation expenses) in 2030 equal to the median values observed today in good performing countries (those that exceed 70 in the SDG health index) with GDP between $3,000 and $6,000 in 2016.

Roads. Using regression analysis, we estimate the additional kilometers of roads that will be needed to account for: i) projected changes in population and GDP per capita over 2016–2030, and ii) ensuring access for all (proxied by raising the Rural Access Index to 90 percent). The cost of the additional road network is estimated assuming a cost per kilometer of $800,000. To account for depreciation, we add five percent of the total cost of the additional kilometers.

Water. We use the World Bank methodology, which estimates population in need of basic and improved access to water and sanitation (Hutton and Varughese, 2016).

Adjustments for Guatemala. We discussed the estimates with country authorities and development partners to validate the methodology. Reflecting these discussions, we adjusted the number of medical professionals to reflect administrative data, and updated the road infrastructure needs (we use the average from the methodology and the local estimates as the baseline) and cost (to $800,000 per kilometerto reflect local estimates).

We summarize the results as additional spending in 2030. For education and health care, we report additional spending in percentage points of GDP, corresponding to the difference between the share of GDP in spending consistent with high performance in 2030 and the current level of spending as a share of GDP. For physical capital, additional spending in percentage points of GDP corresponds to the annualized spending required to close infrastructure gaps between 2019 and 2030.

Appendix II. Financing Strategy: Tax Reform Options

A technical assistance mission on tax reform for Guatemala conducted in 2016 identified significant additional potential revenue from tax policy reform as summarized in Table AII below.

Table AII.

Tax Reform Options

(Percent of GDP)

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Source: Fenochietto and others, 2016.Note: VAT stands for Value Added Taxes (Impuesto al Valor Agregado), ISRPI stands for personal income tax (Impuesto sobre la Renta de Personas Individuales), ISC for consumption taxes (Impuestos Selectivos al Consumo), and IUSI for property tax (Impuesto Único Sobre Inmuebles). In order to reach 4½ percent of GDP of additional revenues from tax reform, further measures equivalent to 1 percent of GDP should be identified.

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1

Prepared by Esther Perez and Mauricio Soto. The authors are thankful for comments from IMF staff participating in the interdepartmental group on SDG costing. The authors are also grateful, for fruitful discussions during the missions held in Guatemala on March 21–23 and June 18–22, to V. Spross (Empresarios por la Educación), V. Lemus, (Ministry of Finance), L. M. Urcuyo and J. Román (Ministry of Communications, Infrastructure and Housing), M. Ponciano and M.García (Ministry of Education), H. Fotouhi, S. Davies, T. Dmytraczenko, and B. C. Marcelo (World Bank), K. Gramajo (SEGEPLAN), F. Gómez (Statistics National Institute), C. Colom and D. Iglesias (IDC Group), J. Arévalo, P. Ramírez and B. De León (Ministry of Public Health and Social Assistance), A. Medina and W. Figueroa (ICEFI), A.M. Díaz (UNDP), B. Pineda (Millenium Challenge Corporation), Y. Osman (USAID), R. Narciso and A. Contreras (UNICEF). We also indebted to A. G. De León, N. Herrera and J. Martinez (UNDP), J. Blas (Ministry of Finance), and J.C. Verdugo (Inclusive Health Institute), for valuable insights and comments. Finally, we would like to thank Christian Vera for excellent research support, and Gerardo Peraza and Roany Toc Bac for their first-rate collaboration from the IMF Regional Office in Central America, Panama, and the Dominican Republic.

2

IMF, Country Report No. 18/54, International Monetary Fund, June 2018.

3

In this paper, Guatemala’s peers are taken to be countries with per capita GDP ranging from $3,000 to $6,000 in 2016.

4

The discussion on provision priorities and modalities heavily draws from previous work by the World Bank, UN agencies, and local think tanks.

5

The aggregate estimates from Gaspar and others (2019) are broadly in line with estimates from other institutions (UNCTAD 2014, Schmidt-Traub, 2015, and Manuel and others, 2018).

6

A score of 80 means that a country is 80 percent of the way to the best outcome.

7

The costing exercise focuses on annual spending flows in 2030. However, spending would have to rise before 2030, so cumulative expenses up to 2030 would be significantly larger. After 2030, education and health spending would recur, whereas infrastructure spending would be expected to decline to cover depreciation of the capital stock built through 2030.

8

In Guatemala, education spending in 2030 consistent with good SDG performance is 7 percent of GDP. This is higher than in good performing countries today reflecting a higher projected share of student age population and higher target enrollment rate.

9

Secondary education in Guatemala comprises three years of general education (basic), and two to three years of vocational training (diversified) that prepares students for a career in the technical, agricultural, commercial, industrial, or teaching domains.

10

Between 2009 and 2015, approximately 20 percent of preprimary and primary school teachers graduated from this program.

11

Throughout this section, basic or primary-level healthcare refer to the provision of vaccination, and maternal and child healthcare including basic nutrition. Secondary- and hospital-level healthcare respectively refer to diagnostic services and specialized care, and cure and care rehabilitation, for the entire population.

12

The Transparency Law from 2013 stated that, starting in 2016, NGOs would no longer be able to receive government funds for the delivery of healthcare services, as foreseen by the Program to Expand Coverage in place since 1997. Since then, health policy debates have focused on how to achieve universal coverage.

13

Such transformation was already envisaged in the Organic Law of the IGSS of 1946.

14

The network layout is based on a combination of the Salesman (circuit-type route between various points) and Steiner (minimum-cost route for a set of given points) connectivity methodologies. The network connects villages of 250, 1000, and 5000 inhabitants, configuring three types of national, secondary, and tertiary networks.

15

To ensure that the largest share of additional revenue from a tax reform goes to social spending, there is a need to tackle revenue earmarking (see paragraph 36).

16

IMF, Country Report No. 18/54, International Monetary Fund, June 2018.

17

IMF, Country Report No. 18/54, International Monetary Fund, June 2018.

18

Tax evasion for the Value Added Tax amounted to 37.7 percent in 2016. See Análisis y Estudios Tributarios, Superintendencia de Administración Tributaria (SAT), https://portal.sat.gob.gt/portal/analisis-estudios-tributarios/#1506976607233-cfdb5baf-4926.

19

Support is being provided by the European Union and the World Bank, with the CICIG as an observer. The census aims, inter alia, to identify and eliminate ghost positions in the public administration.

Attaining Selected Sustainable Development Goals in Guatemala: Spending, Provision, and Financing Needs
Author: Mrs. Esther Perez Ruiz and Mauricio Soto