Fiscal Monitor: Fiscal policy is beginning a gradual shift from supporting demand to reducing deficits, but at different speeds. In addition to its regular analysis of fiscal developments and trends, the Fiscal Monitor, to be published on November 4, will have a special focus on countries' medium-term strategies to put their public finances on a sounder footing. Other topics include the growth impact of various pension reforms; the fiscal implications of addressing the environmental impact of carbon-based fuels; and how revenues from value-added taxes can be increased.
A comprehensive Historical Public Debt Database (HPDD): This FAD database covering nearly the entire Fund membership and an exceptionally long time period will be publicly available through the Fund's website on November 4, together with an accompanying working paper (S. A. Abbas, N. Belhocine, A. El-Ganainy, and M. Horton: "Historical Public Debt Database", forthcoming). | | Taxing the Financial Sector: A Report to the G-20 Leaders and Conference in Paris  One controversial issue addressed by the IMF over the past months has been the "fair and substantial contribution" of the financial sector to meet the costs of the crisis. Working with the Monetary and Capital Markets and Research Departments, FAD prepared a report for the G-20 Leaders (the final report), which attracted wide media and public interest.
The report and other European proposals were discussed at a high-level conference on financial sector taxation held in Paris on September 16. It was attended by senior officials from 35 European central banks and ministries of finance. IMF Deputy Managing Director, Mr. Portugal opened the conference.
Fiscal Policies: Effective Strategies for Stability and Growth  During the IMF's 2010 Annual Meetings, FAD organized a panel discussion on the fiscal challenges ahead as the world economy exits the crisis. The panelists were Prof. A. Alesina (Harvard University), Mr. C. Cottarelli (FAD Director), Mr. P. J. Gordhan (Minister of Finance, South Africa), Prof. S. Johnson (MIT), Mr. J. Ligi (Minister of Finance, Estonia), and Mr. P. Solbes (former Minister of Finance, Spain). Ms. Z. Minton-Beddoes (Economic Editor of The Economist) moderated. The discussion focused on the need for fiscal adjustment and credible medium-term plans to reduce debt ratios, the impact of fiscal consolidation on short-term economic growth, the implications of fiscal policy actions of advanced economies on emerging markets, and the need to foster a coordinated policy response at the G-20 level.
Managing Natural Resource Wealth FAD, the IMF Strategy, Policy, and Review Department, and the Natural Resource Charter organized a seminar during the IMF's 2010 Annual Meetings on "How Societies Can Best Manage Wealth from Natural Resources." The panel discussion included Timor-Leste Minister of Finance Emilia Pires; Andres Velasco, former finance minister of Chile; and Guillermo Ortiz, former central bank governor of Mexico as moderator. World Bank Iraq Senior Advisor, Yahia Said and FAD Assistant Director, Michael Keen also joined the discussion. | | FAD In The News The Financial Times (August 11, 2010) published an op-ed by Olivier Blanchard and Carlo Cottarelli with the title "The great false choice, stimulus or austerity." In this piece, the authors discuss the issues involved in restoring fiscal sustainability while maintaining support for the recovery.
The contrarian views held in the Staff Position Note "Default in Today's Advanced Economies: Unnecessary, Undesirable, and Unlikely" (see comment in this newsletter) sparked attention in the media. See, for example The Wall Street Journal ( "IMF Warns Countries of Debt Risks, Dismisses Idea of Greek Default" by Bob Davis, September 2). Bloomberg radio (Bloomberg surveillance, September 2) featured an interview with Carlo Cottarelli on this topic.
The evidence and recommendations in the note "Long-Term Trends in Public Finances in the G-7 Economies" (see comment in this newsletter) was also extensively covered, including by the Financial Times ("Richer or poorer: Taxing times for debt-laden advanced economies" by Chris Giles, October 7), and The New York Times ("Monetary Fund Warns G-7 on Debt Levels" by Sewell Chan, October 7). | | | Recent Staff Position Notes  "Long-Term Trends in Public Finances in the G-7 Economies", by C. Cottarelli and A. Schaechter reviews the generalized rise of public debt levels in the G-7 economies in the decades since the 1970s, when debt became the ultimate shock absorber: rising in bad times and not coming down in good times. It discusses the unsustainability of these trends going forward and offers policy options to address this problem.
"Default in Today's Advanced Economies: Unnecessary, Undesirable, and Unlikely," by C. Cottarelli, L. Forni, J. Gottschalk, and P. Mauro examines the likelihood that worsening public finances lead to a debt default in certain advanced countries. It argues that debt defaults in preceding decades have been triggered primarily by spiraling debt service costs, while the current challenges in some European advanced economies stem from large primary deficits. The paper concludes that default would make little sense for these countries: the problem is not the debt servicing burden, but the primary deficit.
Recent Working Papers In "Fiscal Deficits, Public Debt, and Sovereign Bond Yields," E. Baldacci and M. S. Kumar explore the impact that fiscal deficits and government debt had on long-term sovereign bond yields during the last 30 years in 31 advanced and emerging market economies. It finds that increases of one percentage point of GDP in deficit and government debt lead to an increase in real interest rates of around 20 bps and 5 bps, respectively.
In "Restoring Debt Sustainability after Crises: Implications for the Fiscal Mix," E. Baldacci, S. Gupta, and C. Mulas-Granados analyze the experience of 99 advanced and developing economies in restoring fiscal sustainability after crises. They confirm earlier findings on the key importance of current expenditure cuts, but they also find that revenue-raising measures play an important role in large fiscal consolidations. Technical Notes and Manuals "Evaluating Government Employment and Compensation" by B. Clements, S. Gupta, I. Karpowicz, and S. Tareq discusses criteria for evaluating government employment and compensation, and options for reducing government's wage costs.
"Health Care Spending Issues in Advanced Economies" by E. Jenkner and A. Leive. Both public and total health spending have increased substantially in the past decades—a trend expected to continue, driven by ageing, rising incomes, and technological change. The note offers guidance for analyzing the evolution of public health expenditure and evaluating policy options in advanced and emerging market economies.
"Revenue Administration: Performance Measurement in Tax Administration" by W. Crandall explains performance management and its measurement, how tax administrations apply it, key tasks in implementing a performance management system, and country experiences.
"Revenue Administration: Managing the Shadow Economy" by B. Russell discusses the shadow economy and its measurement, as well as actions which revenue agencies can take to manage it.
"Government Cash Management: Its Interaction with Other Financial Policies" by M. Williams offers guidance on policy, institutional and practical issues for governments looking to develop a cash management function. It discusses the implications of active cash management for other functions such as debt management, monetary policy, and financial market development. Technical Assistance Activities | | Career Opportunities The Fiscal Affairs Department (FAD) seeks talented and dedicated professionals with a background in different areas of public finance, to work on macro-fiscal policy issues and to provide technical assistance advice to IMF member countries on public financial management, tax policy reform, revenue administration, and different expenditure policy issues. Vacancies in FAD for staff and long-term expert positions are posted on http://www.imf.org/jobs. FAD also seeks experts who are interested in occasional short-term (2-3 week) assignments; interested candidates may send their CVs to FADexperts@imf.org. | | |
