IMF Country Research Articles

Fiscal Risk Matrix for G20 Countries

Risk matrix, as a well know tool for corporate finance, penetrates public finance as a simplified idea in budgetary guides in a small number of leading countries only. At the same time the complexity of socio-economic environment of public finance, needs of public finance manageability and high sovereign debt call for advanced the risk matrix design. The first step of the research is the observation of the leading countries’ matrix examples and articles targeting the same topic to determine the risk matrix structure. The second step involves comprehensive reading of the most transparent countries to create a list of the matrix factors. The factors include key socio-economic events as sources of risks and key budgetary variables changes as types of risks. The third step ranges the matrix elements (cells) by their occurrence in G20 countries based on comprehensive reading of IMF countries’ reports. The research result is a one-page risk matrix with 10x13 key factors and many ranging elements, designed as the compromise between the environment complexity and manageability needs for public finance.

Eurozone Debt Crisis and Albania

Albania as part of the Western Balkans was affected by the consequences of the financial crisis in 2009 followed by the EU debt crisis. However, as a result of external factors, the slowdown in economic growth began to feel in 2008. Despite the fact that the economic growth in the country was the largest in the Western Balkans region and remained at positive levels even during the crisis, some of the economic and financial indicators had significant impact. Also, high increase in public spending in the infrastructure area was noticed, which accompanied the pre-crisis period and further deteriorated by its impact. Looking at these up rising data of the budget deficit and the public debt to cover the latter, IMF proposed two fiscal rules in order to contribute strengthening fiscal sustainability: 1- The debt rule, which directly allows the full functioning of automatic stabilizers and keeps government under control; 2- The expenditure rule aiming at debt brake, which allows a close connection between the operational goal and the fiscal sustainability objective (IMF Country Report No. 10/206: July 2010). Focus of this paper is particularly on the most important economic and financial indicators in Albania to better understand the extent of the impact of this crisis in the country and the measures taken as well. Through the comparisons of the situation before and after the crisis will be reached on the conclusions on the main instruments used by the government to cope with the crisis or avoid its consequences.

Growth at Risk: Concept and Application in IMF Country Surveillance

The growth-at-risk (GaR) framework links current macrofinancial conditions to the distribution of future growth. Its main strength is its ability to assess the entire distribution of future GDP growth (in contrast to point forecasts), quantify macrofinancial risks in terms of growth, and monitor the evolution of risks to economic activity over time. By using GaR analysis, policymakers can quantify the likelihood of risk scenarios, which would serve as a basis for preemptive action. This paper offers practical guidance on how to conduct GaR analysis and draws lessons from country case studies. It also discusses an Excel-based GaR tool developed to support the IMF’s bilateral surveillance efforts.

Growth at Risk: Concept and Application in IMF Country Surveillance

The growth-at-risk (GaR) framework links current macrofinancial conditions to the distribution of future growth. Its main strength is its ability to assess the entire distribution of future GDP growth (in contrast to point forecasts), quantify macrofinancial risks in terms of growth, and monitor the evolution of risks to economic activity over time. By using GaR analysis, policymakers can quantify the likelihood of risk scenarios, which would serve as a basis for preemptive action. This paper offers practical guidance on how to conduct GaR analysis and draws lessons from country case studies. It also discusses an Excel-based GaR tool developed to support the IMF’s bilateral surveillance efforts.

An Empirical Assessment of Performance Measurement & Management of the Public Sector by Way of the NPM Tools: A Review of the Public Sector of Czech Republic

Czech Republic’s 2017 economic indicators gave quite significant performance and also showed resilience with consistency and prudence in its monetary policies within its inflation targeting framework. This performance could be attributed to prudent economic factors and also due to a combined relatively tight monetary policy and also accommodating fiscal policy measures. (IMF country Report Oct. 2017). In spite of all these positive macroeconomic indicators one cannot overlook the role played by measuring and managing performance within the country’s public sector. It is worthy to know that the introduction of Performance measurement as well as management within the public sector is a way to ensure transparency, Efficiency and Effectiveness in making decision that will inure to the benefit of the public sector in terms of using public funds to boost performance in the economy. This notwithstanding the picture is quite different in terms of its practice thus striking several impediments defining performance, identifying suitable indicators as well as implementing a performance management system. It is however noteworthy that the challenge is still present as of today i.e. identifying the most suitable modules for measuring and managing performance within the public sector so as not to come up with a speculative behavior of managers within the public sector of global economies. We are by this paper seeking to present the modules employed in measuring performance within the public sector of the Czech Republic as well as other drawbacks generated by these modules. We further do an assessment of the perverse effects measuring performance have on the public sector, since its knowledge will be useful in building an optimal system for measuring and managing performance. We will also do a critical review of the New Public Management (NPM) considered by many as a paradigm shift in public administration which points out the failures and or the limitations of public sector overtime and the associated problems, its nature and processes. We will also do a further assessment of some of the criticism of the NPM doctrine from the political point of view in other transitional countries and finally hypothesize the way by which these systems are employed depending on the characteristics of its activities especially in terms of contractibility, which is considered a broad construct incorporating clarity of goals, its ability to select undistorted performance metrics, and the degree by which public sector managers appreciate and control its transformational process.

The Research on the Money Supply of Central Bank Digital Currency

Currently, the only central bank digital currencies (CBDC) in the world is Venezuela’s currency—Petro. Nowadays, the IMF, BIS, and major countries have conducted a lot of research on CBDC. It’s an urgent issue for the central bank to issue CBDC, determine and formulate the circulation of CBDC and the issuance speed, and supervise it. Therefore, establishing ARMA and VARs by sorting out literature, the paper uses the characteristics of CBDC--cash, and similarities with third-party payment in terms of payment to determine the circulation of CDBC by third-party payment users and currency in circulation. The model calculates and predicts the speed of circulation of digital currency. The issuance of CBDC will accelerate the circulation of money. In this regard, we will explore the impact of money supply on monetary policy and make relevant recommendations.

Global Debt Database

This paper describes the compilation of the Global Debt Database (GDD), a cutting-edge dataset covering private and public debt for virtually the entire world (190 countries) dating back to the 1950s. The GDD is the result of a multiyear investigative process that started with the October 2016 Fiscal Monitor, which pioneered the expansion of private debt series to a global sample. It differs from existing datasets in three major ways. First, it takes a fundamentally new approach to compiling historical data. Where most debt datasets either provide long series with a narrow and changing definition of debt or comprehensive debt concepts over a short period, the GDD adopts a multidimensional approach by offering multiple debt series with different coverages, thus ensuring consistency across time. Second, it more than doubles the cross-sectional dimension of existing private debt datasets. Finally, the integrity of the data has been checked through bilateral consultations with officials and IMF country desks of all countries in the sample, setting a higher data quality standard.

China-IMF Collaboration: Toward the Leadership in Global Monetary Governance

This paper analyses China’s collaboration with the IMF in various programmes, including China’s participation in IMF technical assistance programmes, IMF country surveillance for China, China’s attempt to weaken the US dominance in the international monetary system through the IMF, and the RMB’s entry to the SDR basket. The results of these collaboration activities reflect the extent to which the IMF assists China in pursuing leadership in global governance of monetary policies. The paper raises two key points. First, it highlights the impact of Chinese actors’ interests and objectives regarding China’s domestic economic development and outward expansion on their government’s interaction with international organizations. Second, it argues that the result of China-IMF collaboration is determined by two conditions (a) the compatibility between Chinese and IMF interests and objectives regarding key economic and political issues, and (b) China’s relative role in the IMF’s institutional governance in comparison with the Fund’s other member states.

INTERNATIONAL MONETARY FUND AND EAST ASIA: DEVELOPMENTS, CHALLENGES, AND LESSONS LEARNED

The article demonstrates that during the extended period of cooperation, the IMF’s activities have had both positive and negative impact on the development of economies of the East Asia region. On the one hand, the IMF initiated and supported in-depth reforms that formed a solid basis for sustainable development and growth of countries of the region. On the other hand, the IMF failed to achieve positive outcomes in some specific important areas mostly because of its unbalanced policies and due to disregard to specific needs of particular countries of the region. Furthermore, the IMF failed to properly discharge one of its main mandates to effectively predict, address, and overcome international financial crisis tendencies and processes that emerged from the fragility and the lack of sustainability of the global liquidity system at the regional level, and in particular during the Asian crisis of 1997-98. The IMF’s failures led to a significant decrease of cooperation with the East Asia region and gave rise to the IMF stigma and subsequent regionalism processes. Although quite uncertain, any further cooperation may only be carried out on a new basis with due consideration of the specificity of the region and the particular countries. Methodology. The author provides first, based on the IMF’s official statistics and data, an analysis of the cooperation between the IMF and the East Asia region in order to identify main achievements and failures and then explores possible forms of further cooperation with due regard to all stakeholders’ interests and needs. The author aims to demonstrate, based on the IMF’s experience in East Asia, that cooperation between the IMF and particular countries or regions is a complex and challenging process, which most often involves the need to give due consideration to various important factors, including country-based specificities and risks of reluctance to the IMF’s activities. Results. It is shown that despite the IMF’s several failures in East Asia the cooperation was, from long-term perspective, beneficial for the countries of the region, and that it is in the best interests of all stakeholders to find ways for further cooperation although on a new basis in order to ensure sustainable growth and to be able to effectively face eventual financial crises.

The Decade of Adjustment: A Review of Austerity Trends 2010-2020 in 187 Countries

This paper: (i) examines the latest IMF government spending projections for 187 countries between 2005 and 2020; (ii) reviews 616 IMF country reports in 183 countries to identify the main adjustment measures considered by governments in both high-income and developing countries; (iii) applies the United Nations Global Policy Model to simulate the impact of expenditure consolidation on economic growth and employment; (iv) discusses how austerity threatens welfare and social progress; and (v) calls for urgent action by governments to adopt alternative and equitable policies for socio-economic recovery.

The Age of Austerity: A Review of Public Expenditures and Adjustment Measures in 181 Countries

This paper: (i) examines the latest IMF government spending projections for 181 countries by comparing the four distinct periods of 2005-07 (pre-crisis), 2008-09 (crisis phase I: fiscal expansion), 2010-12 (crisis phase II: onset of fiscal contraction) and 2013-15 (crisis phase III: intensification of fiscal contraction); (ii) reviews 314 IMF country reports in 174 countries to identify the main adjustment measures considered in high-income and developing countries; (iv) discusses the threats of austerity to development goals and social progress; and (v) calls for urgent action by governments to adopt alternative and equitable policies for socio-economic recovery.

Progress Report on the Activities of the Independent Evaluation Office

Since October 2012, the Executive Board has discussed two IEO evaluation reports, International Reserves—IMF Concerns and Country Perspectives on December 7, 2012, and The Role of the IMF as Trusted Advisor on February 1, 2013. The Board also discussed the External Evaluation of the IEO on March 21, 2013. In addition, the IEO advanced work on the ongoing “Assessment of Self-Evaluation in the IMF,” which will go forward to the Executive Board in coming months. Following consultations on possible topics, the IEO has also initiated evaluations on IMF forecasting, country statistics, and the IMF’s response to the global financial crisis.

Implementation Plan in Response to Board-Endorsed Recommendations for the IEO Evaluation of International Reserves--IMF Concerns and Country Perspectives

This paper proposes Management’s response to the IEO’s Evaluation of International Reserves—IMF Concerns and Country Perspectives. The proposed implementation plan focuses on those recommendations that are not already being addressed by other recent Fund initiatives, and include: (i) a successor paper on reserve adequacy, which will review the work contained in the Fund’s 2011 Assessing Reserve Adequacy paper and develop additional and updated guidance where needed; (ii) the preparation of a staff guidance note for assessing adequacy; and (iii) additional engagement on reserve issues with members, the private sector, and academics.

The IMF, Crises and Low-Income Countries: Evidence of Change?

This paper assesses the policy role of the IMF in Low-Income Countries (LICs) in the wake of the global financial crisis and in response to its own claims of policy redesign and increased flexibility. The assessment focuses on the Fund's monetary and fiscal policy stance in a selection of case study countries over the period 2008−2010. The paper finds that while the IMF has allowed for modest and short-term fiscal and monetary accommodation as an immediate response to the crisis, the Fund's medium to long-term policy agenda has remained unchanged. Both theory and evidence suggest that the Fund remains committed to its pre-crisis policy priorities. Furthermore, the global financial crisis appears to have enabled the Fund to reassert its role as guardian of an orthodox macroeconomic order. These developments are particularly troublesome given that the Fund's prevailing macroeconomic framework continues to be inconsistent with the urgent development needs of LICs, where more expansionary fiscal policies and more liquidity-focused monetary policies are needed to support structural diversification, and foster sustainable and equitable growth and development.

Macroeconomic Policy Frameworks for Resource-Rich Developing Countries--Analytic Frameworks and Applications

This supplement presents the analytical frameworks underlying the IMF’s staff’s enhanced policy analysis and advice to resource-rich developing countries (RRDCs). The proposed macro-fiscal models, which are applied to selected country or regional cases, are aimed at addressing questions regarding how to deal with resource revenue uncertainty and how to scale up spending within relevant frameworks that ensure fiscal and external sustainability while addressing absorptive capacity constraints. The country applications confirm the importance attached by both IMF staff and country authorities of using the appropriate macro-fiscal frameworks to address the specific challenges faced by RRDCs.

Progress Report on the Activities of the Independent Evaluation Office

This report summarizes the activities of the Independent Evaluation Office (IEO) since the 2011 Annual Meetings. In this period, the IEO has advanced work on three ongoing evaluations: International Reserves: IMF Advice and Country Perspectives, The Role of the IMF as Trusted Advisor, and Learning from Experience at the IMF: An IEO Assessment of Self-Evaluation Systems. The IEO expects to submit these evaluations to the Executive Board over the course of the year. The IEO has begun consultations on topics for future evaluations and will present a tentative work program to the Executive Board for review in due course.

Austerity Measures Threaten Children and Poor Households: Recent Evidence in Public Expenditures from 128 Developing Countries

In the wake of the food, fuel and financial shocks, a fourth wave of the global economic crisis began to sweep across developing countries in 2010: fiscal austerity. Serving as an update of earlier research by UNICEF, this working paper: (i) examines the latest IMF government spending projections for 128 developing countries, comparing the three periods of 2005-07 (pre-crisis), 2008-09 (crisis phase I: fiscal expansion) and 2010-12 (crisis phase II: fiscal contraction); (ii) discusses the possible risks for social expenditures; (iii) assesses the most common adjustment measures being considered by developing countries in 2010-11 and their potentially adverse impacts on vulnerable populations; and (iv) summarizes a series of alternative policy options that are available to governments to expand fiscal space and ensure a Recovery for All, including children and poor households. While most governments introduced fiscal stimuli to buffer their populations from the impacts of the crisis during 2008-09, premature expenditure contraction became widespread beginning in 2010 despite vulnerable populations’ urgent and significant need of public assistance. Our analysis confirms that the scope of austerity is severe and widening quickly, with 70 developing countries (or 55 percent of the sample) reducing total expenditures by nearly three percent of GDP, on average, during 2010, and 91 developing countries (or more than 70 percent of the sample) expected to reduce annual expenditures in 2012. Moreover, comparing the 2010-12 and 2005-07 periods suggests that nearly one-quarter of developing countries appears to be undergoing excessive contraction, defined as cutting expenditures below pre-crisis levels in terms of GDP. Regarding austerity measures, the scope of options under consideration in developing countries seems to have widened considerably since a pioneer expenditure analysis was carried out by UNICEF in October 2010 (“Prioritizing Expenditures for a Recovery for All”). An updated review of the latest IMF country reports shows that governments are weighing various cost-saving policies, including: (i) wage bill cuts/caps, including salaries of education, health and other public sector workers; (ii) elimination or reduction of subsidies, including for basic food items; and (iii) rationalizing social protection schemes by reforming pensions or further targeting social safety nets. Also widely discussed is the introduction or broadening of taxes, such as VATs, on basic products consumed by vulnerable populations. The paper questions if the projected fiscal contraction trajectory – in terms of timing, scope and magnitude – as well as the specific austerity measures considered are conducive to the objective of adequately protecting children and poor households and the achievement of development goals such as the MDGs. The paper encourages policymakers and development partners to evaluate the potential human and development costs of foregone social expenditures and to consider alternative policy measures to ensure a Recovery for All.

Progress Report on the Activities of the Independent Evaluation Office

Since its last report to the IMFC in April 2011, the Independent Evaluation Office (IEO) completed the evaluation of Research at the IMF: Relevance and Utilization. The IEO continues its work on the evaluations of “International Reserves: IMF Advice and Country Perspectives” and of “The Role of the IMF as Trusted Advisor,” announced last spring. Draft issues papers on these two evaluations, as well as on a new study, “Learning from Experience at the IMF: An IEO Assessment of Self-Evaluation Systems,” were circulated to the Executive Board and posted on the IEO website for public comment.

Asymmetric Extreme Sampling, Developed Versus Emerging Countries, and the Forward Premium Puzzle

We analyse the validity of UIP in a panel of 41 currencies over the time window 1975-2010. We confirm that in general UIP does not hold for developed countries, whereas it does hold for emerging countries. This result is found for various metrics of ‘developed’ and ‘emerging’ countries (IMF country classification, per capita GNI, inflation, inflation volatility). We confirm that UIP may hold in the extremes for developed countries, but this result is only found in the right-hand side tail of interest rate differentials (IRDs). Contrasting with earlier work (that assumed absolute IRDs) our findings suggest an asymmetric relationship. For emerging countries we find an inverse relationship, namely UIP does not hold in the extremes but it does hold in the centre 80% of observations.

Framework Administered Account for Selected Fund Activities - United States Subaccount for Selected Fund Activities

Niger’s macroeconomic performance and policies through end-January 2010 were assessed in the IMF Country Report No. 10/146, issued following the completion of the third program review under the arrangement under the Extended Credit Facility (ECF) from the IMF. Since the military intervention in February, the near-term growth outlook has weakened, reflecting the intensity of the food crisis and some contraction in public spending, but the outlook for 2011 is broadly favorable provided that budgetary policies remain appropriately cautious, that normal weather conditions prevail, and that donor support for Niger picks up.