Support of imf supported programs 8% advise member countries on fiscal policies 6% other 1% 2 fiscal affairs department. Focuses on the study of the fiscal adjustment in international monetary fund imfsupported programs, the role of the imf in three capital account crises in indonesia, korea and brazil and the prolonged use of imf resources conducted by the independent evaluation office. Revenuerelated structural reform measures in selected programs with large revenue shortfalls 40 5. Pdf the role of the imf in the european debt crisis researchgate. Imfs structural adjustment programs for pakistan isej. Gdp, real in constant prices gross domestic product of the current year valued at the prices of a base year. Mar 14, 2007 imf supported programs have conventionally been assessed by examining their effects on intermediate variables and final outcomes.
Policysetting within this framework requires decisions about the appropriate amount and form of fiscal adjustment, including the desired level of the fiscal deficit. Imf analysts have sought to open up the black box by more closely examining program design and implementation, as well as how these influence programs effectiveness. Fiscal adjustment in imfsupported programs ebook por. Enhancement program dsep to enhance incentives for countries to move toward. This paper investigates the political and economic determinants of successful fiscal adjustment in 25 emerging market economies from 1980 to 2001. The international monetary fund imf is an international organization that provides financial assistance and advice to member countries. Specifically, the sizes and frequencies of loans are influenced by a countrys presence at the fund, as measured by the countrys share of quotas and professional staff. To grow, a country needs tax policies and tax administration, laws and institutions to formulate and execute a budget, and trained staff to implement fiscal policies, among other factors. Idas allocation and financial policies to support financial. Second, weak public financial management is the seed of fiscal slippages and fiscal indiscipline observed in the country over the years. A download it once and read it on your kindle device, pc, phones or tablets. They are also invaluable to increase a countrys readiness to respond to a crisis and to help with the recovery and beyond. A fiscal adjustment that relies unduly on cuts in investment or excessive revenue enhancements may lower an economys growth trajectory.
Public debt sustainability and analysis in marketaccess countries. In terms of program design, the ieo concluded that the imfsupported programs involved an unusually strong, frontloaded fiscal adjustment p. Aug 09, 2017 the impact of revenue conditionality in imf supported programs works over time. Using a panel data set over the 197597 period and covering 67 developing and emergingmarket economies with 461 imf stabilization programs and 160 currency crises, we find that currency crises even after. Structural adjustment and macroeconomic policy issues kindle. Envisaged and actual fiscal adjustment in nine imfsupported programs 39 4. Fiscal affairs department international monetary fund.
We find no significant effects from imf loan programs on inflation, government consumption, and the currentaccount balance. Reforming the international institutional framework part 1. Sba is standby arrangement, eff is extended fund facility, saf is structural adjustment facility, and esaf is enhanced structural adjustment facility. The scale and pace of reforms to the imfs practices do not match the organizations.
More recently greater attention has been paid to their implementation, on the assumption that in order to work programs need to be implemented. Although most programs targeted growthfriendly fiscal consolidation, the adjustment. We ask how domestic political considerations shape the distribution of cuts made by governments in imf programs. An introduction to the international monetary fund imf. Code book for assessing the need for fiscal adjustment. Lee fiscal adjustment in imfsupported programs por international monetary fund. Fiscal adjustment in imfsupported programs international. The first is whether the programs supported by the imf, if. Fiscal affairs department, 1995, guidelines for fiscal adjustment, imf pamphlet series, no. Fiscal policy for growth and development further analysis and. We focus on the projections of two macroeconomic aggregatesspecifically, on the ratios of the fiscal surplus to gdp and of external current account surplus to gdpduring the years immediately following the initiation of an imf supported program. Application of debt limits under fundsupported programs. Did the imf actually ease up on structural adjustment.
Effectiveness of imfsupported stabilization programs in. Also, both the lic and mac dsa templates are posted on the imf website, and the former is also posted on. Consolidation is also proceeding rapidly in the three countries with adjustment programs supported by imf and eu financing. Macroeconomic policy, debt and the imf 4 introduction the difficulties associated with the world recession and a cripplingly high public debt have forced jamaica to seek assistance from the international monetary fund imf and restructure its entire domestic debt stock the socalled jamaica debt exchange, or jdx. For fundsupported programs there is a more pressing reason to base sustainability. The two bretton woods institutions require borrowing countries to implement certain policies in order to obtain new loans or to lower interest rates on existing ones. Let me first say something about advanced economies, which is where the most urgent fiscal problems exist. Independent evaluation office available from rakuten kobo. Our central finding is that imf programs shrink the role played by domestic politics. Statistical definitions of government government finance statistics manual 2001 institutional structure of government and public sector what is a precise definition of government and why it is relevant potential pitfalls of lacking a precise definition of government definitions of government in imf supported programs. Assessing fiscal space international monetary fund. It presents evidence that does not support some critics view that imfsupported programs typically adopt a onesizefitsall approach to fiscal adjustment, nor the perception that programs always involve austerity by targeting reductions in public spending. This form is used to apply for courses at the imf institute headquarters hq in washington, d. Does conditionality in imfsupported programs promote revenue.
A type of fiscal adjustment designed to quickly raise the primary balance to a targeted level. This paper investigates the output effects of imfsupported stabilization programs, especially those introduced at the time of a severe balance of paymentscurrency crisis. But while the effect of the imfs structural adjustment programs. Fiscal policy design therefore needs to ensure that the quality of fiscal adjustment minimizes adverse.
Since the launch of the prgf, programs have increasingly accommodated the fiscal spending of aid in countries that received scaledup aid inflows. This result has important implications for our understanding of government spending priorities under different resource constraints. Experience with gdp growth prior to and during program periods. It presents evidence that does not support some critics view that imfsupported programs typically adopt a onesizefitsall approach to fiscal adjustment, nor the perception that programs always.
Mac dsa debt sustainability analysis for marketaccess countries. Fiscal consolidations undertaken under imfsupported programs also have a higher probability of success. This article will discuss the main functions of the. Fiscal adjustment in imfsupported programs ebook by. These are the general demands by imf and world bank, requiring poor countries to reduce spending on things like health, education and development, while focusing on repayment and other economic policies as priority. These are the general demands by imf and world bank, requiring poor countries to reduce spending on things like health, education and development, while focusing on repayment and other economic policies as. The fiscal space analysis suggests that the authorities have some space in the next few years to undertake a more gradual fiscal adjustment than set out in the imf staffs baseline. Currency crises and the output costs of imf supported stabilization programs, epru working paper series 0109, economic policy research unit epru, university of copenhagen. This paper looks at the appropriate scope and pace of fiscal adjustment in saudi arabia. Imf lending practices respond to economic conditions but are also sensitive to politicaleconomy variables. If anything, the difference between program and nonprogram countries in their mac. The average targeted fiscal adjustment in 3 imf programs was 1. Using a crosscountry sample of 169 imfsupported programs and detailed studies of 15 programs, this evaluation report e.
Determinants of the differences between envisaged and actual fiscal adjustment. Using a crosscountry sample of 169 imfsupported programs and detailed studies of 15 programs, this evaluation report examines various. The return of structural adjustment brings these decadesold criticisms of imf programs back to the fore. Sep 04, 2016 in terms of program design, the ieo concluded that the imfsupported programs involved an unusually strong, frontloaded fiscal adjustment p. Comparing growth and revenue underperformance 40 4. A central component of international monetary fund imf programs is reducing government budget deficits. Strengthening public debt transparency world bank documents. We focus on the projections of two macroeconomic aggregatesspecifically, on the ratios of the fiscal surplus to gdp and of external current account surplus to gdpduring the years immediately following the initiation of an imfsupported program. Does conditionality in imfsupported programs promote. Independent evaluation office disponible en rakuten kobo. Their efforts have also focused on identifying the.
Bp160211 the imfs role in greece in the context of the 2010 standby arrangement charles wyplosz and silvia sgherri. For the report, any country engaged in an imfsupported program for at least seven of the previous ten. Guidelines for fiscal adjustment international monetary fund. Evaluation report fiscal adjustment in imfsupported programs. Data gaps and financial crises in historical context. Addressing debt vulnerabilities in ida countries world bank. Evaluation of prolonged use of imf resources 2002 this evaluation assesses the causes and consequences of countries having repeated access to imf financing. Structural adjustment and macroeconomic policy issues kindle edition by jafarey, v.
Effectiveness of imfsupported stabilization programs in developing. Levels of grants in a sample of subsaharan african countries. One essential element is the link between the balance of payments and the central banks balance sheet, which lies at the heart of the monetary approach to the balance of payments international monetary fund, 1977. Use features like bookmarks, note taking and highlighting while reading structural adjustment and macroeconomic policy issues.
To understand the imf approach to economic stabilization and espe cially how it functions in its quantitative aspects, it is first essential to understand the process of an imf supported program, described in sec tion 2. An example of structural tax revenue reforms with a positive revenue impact is the move to replace harmful trade taxes with broadbased consumption taxes. Some responses do imfsupported programs impose austerity on countries in financial crisis. Adjustment episodes launched in countries where governments enjoy a parliamentary majority and do not face imminent elections, are found to be more successful. Empirical studies have begun to include political economy variables in an attempt to explain implementation. Projecting macroeconomic adjustment in imfsupported programs. Debt vulnerabilities in emerging and lowincome economies.
Overall, our conclusion from the direct and indirect effects is that greater participation in imf loan programs reduces economic growth. The roc examines the performance of fundsupported programs ongoing. A country in fin ancial crisis is likely to face a period of austerity whether or not it approaches the imf. For the report, any country engaged in an imf supported program for at least seven of the previous ten years is classified as a prolonged user in that year. Adjustments to the design of nonzero debt ceilings. Research work by the imfs staff on the effectiveness of the country programs the organization supports, which has long been carried out, has intensified in recent years. The analysis is based on considerations from the funds new framework for assessing fiscal space and is extended to account for some of the unique characteristics of oil exporting countries.
While democracies allocate larger shares of their budgets to public services in the absence of imf programs, the difference between democracies and nondemocracies disappears under imf programs. The imfs latest fiscal monitor takes stock of this progress. Table 7 number of structural policy commitments in imf programs with three asian crisis countries, 19972000 37a. Access fiscal adjustment inflation adjustment ca adjustment reserve adjustment structural adjustment adjusted rsquared macroeconomic conditions country characteristics program characteristics euro the size of adjustment and financing in the fund supported programs are largely explained by macroeconomic. Given the differences in their origins, imf supported programs in capital account crisis were confronted with challenges that differed considerably from those of more traditional imf programs. It presents evidence that does not support some critics view that imfsupported programs typically adopt a onesizefitsall approach to fiscal adjustment, nor the perception that programs. An example of structural tax revenue reforms with a positive revenue impact is the move to replace harmful trade taxes with broadbased consumption taxes baunsgaard and keen 2010. For instance, the november 2008 fundsupported program of iceland postpones fiscal adjustment, allowing for a high fiscal deficit in 2009 to avoid exacerbating the ongoing collapse of economic activity. Independent evaluation office ieo of the imf fiscal. Fiscal adjustment policies should be designed within an overall methodological framework that links the implementation of a comprehensive set of policy measures to the achievement of the economys objectives for inflation, growth, and external balance. Imf supported programs have conventionally been assessed by examining their effects on intermediate variables and final outcomes. Fiscal consolidations undertaken under imf supported programs also have a higher probability of success. In addition to their harshness, the ieo said the p.
This measure reflects the changes in volume from one period to another. To understand the imf approach to economic stabilization and espe cially how it functions in its quantitative aspects, it is first essential to understand the process of an imfsupported program, described in sec tion 2. To support and sustain fiscal adjustment, measures to reform and strengthen public financial management, in terms of establishing credibility, predictability and control over budget execution, are paramount. Fiscal adjustment in imfsupported programswashington, d.
Enforcing structural adjustment policies saps to ensure debt repayment and economic restructuring. Macdsa debt sustainability analysis for marketaccess countries. The first is whether the programs supported by the imf, if implemented, would stabilize the economy and promote growth. Projecting macroeconomic adjustment in imfsupported.
Using a crosscountry sample of 169 imfsupported programs and detailed studies of 15 programs, this evaluation report examines various aspects of fiscal adjustment in imfsupported programs. Our preliminary results show that fragile states that have received technical assistance, also have improved their fiscal performance. Most advanced economies have made good progress lowering their fiscal deficits the imbalance between spending and revenues. Imf supported programs include key objectives such as growth, inflation, and current account adjustment and the intermediate policy targets such as monetary and fiscal policies needed to. Since the economic impact of its fiscal provisions will be much affected by which expenditures are trimmed and what is done with taxes, the fund is becoming more insistent on knowing how a government proposes to implement promised reductions in the budget deficit, increasingly urging. Evrensel department of economics, portland state university, portland, or 972070751, usa abstract this paper examines the effectiveness of fundsupported stabilization programs by investigating whether the imf achieves its own objectives in such programs. The threeyear economic adjustment program was supported by financial. Research work by the imf s staff on the effectiveness of the country programs the organization supports, which has long been carried out, has intensified in recent years. The economy of saudi arabia has started to feel the impact of the fiscal adjustment. In other cases, if government finances are not a serious problem but the economic situation is challenging fiscal stimulus can be an appropriate policy response.
This selected issues paper looks at the appropriate scope and pace of fiscal adjustment in saudi arabia. Building fiscal institutions in fragile states imf blog. Fiscal policies have provided large emergency lifelines to people and firms during the covid19 pandemic. Pdf imf supported programs in capital account crises. An approval of an imf program indicates that a new imf financial arrangement was approved for a country in the fiscal year from may of the previous year to april of the current year. Structural adjustment programs saps consist of loans provided by the international monetary fund imf and the world bank wb to countries that experienced economic crises. Read fiscal adjustment in imfsupported programs by international monetary fund.
Projections of nextyear aid inflows broadly correct and have also become more accurate over recent years. Effectiveness of imfsupported stabilization programs in developing countries ays. Structural adjustment and macroeconomic policy issues. Common criticisms of the imf turkey forecast turkey.
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