Fiscal Affairs Department - International Monetary...

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AT A G L A N C E, 2 0 1 2 I N T E R N A T I O N A L M O N E T A R Y F U N D F iscal Affairs Department

Transcript of Fiscal Affairs Department - International Monetary...

Page 1: Fiscal Affairs Department - International Monetary Fundblog-pfm.imf.org/files/fad-brochure-2012.pdf · Senhadji, Victoria Perry, Brian Christensen, Gerd Schwartz, Johannes Mueller,

A t A G l A n c e , 2 0 1 2

I n t e r n A t I o n A l M o n e t A r y F u n d

Fiscal Affairs Department

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Fiscal Affairs Department

iscal policy affects macroeconomic stability, growth, and income distribu-tion. Citizens expect their governments to ensure value for money from

public spending, a fair and efficient tax system, and transparent and accountable management of public sector resources.

Since 1964, the Fiscal Affairs Department (FAD) of the International Monetary Fund has been a leading source of fiscal policy and management expertise worldwide. FAD monitors and analyzes global and regional fiscal trends; advises IMF member countries on fiscal issues directly or in close cooperation with the IMF area departments; and contributes to the design and implementation of IMF-supported programs. FAD’s analysis and research are at the forefront of fiscal policy debates and its recent work has contributed to the discussion of fiscal policy options to address fiscal challenges in the aftermath of the global financial crisis. Each year, FAD staff and experts provide advisory services to about 130 IMF member countries comprising advanced, emerging, and low-income economies.

FAD receives welcome financial support from donors such as Belgium, Canada, Germany, the European Commission, Japan, the Netherlands, Norway, Sweden, Switzerland, the United Kingdom, and the United States, as well as from other donors, supporting the IMF’s Regional Technical Assistance Centers (RTACs) and two recently established Topical Trust Funds (TTFs).

F

Allocation of Key FAD Outputs in Fiscal Year 2012

Technical AssistanceIMF financed

(32%)

Technical Assistanceexternally financed

(44%)

Monitor global,regional, and

countrydevelopments

(13%)

Assist IMF-supported programs

(5%)Advise member

countries on fiscalpolices (5%)

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Senior Management. First row from left to right: Katherine Baer, Kentaro Ogata, Paolo Mauro, Martine Guerguil, Carlo Cottarelli, Adrienne Cheasty, Marco Cangiano, Julio Escolano, Sanjeev Gupta. Second row: Philip Gerson, Benedict Clements, Abdelhak Senhadji, Victoria Perry, Brian Christensen, Gerd Schwartz, Johannes Mueller, Juan Toro, Kiyoshi Nakayama, Michael Keen. Gilbert Terrier and Bernardin Akitoby (not pictured).

FAD staff.

Fiscal Affairs Department

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FAD supports the IMF’s interactions with member countries by assigning some 50 fiscal economists

to IMF surveillance and program teams. Further countries are also covered through ad hoc participation in area department missions. In addition to analyzing broad fiscal developments, FAD economists conduct in-depth analysis of macrofiscal and structural fis-cal issues in the countries to which they are assigned. In carrying out their tasks, these economists draw on the extensive fiscal expertise of FAD as a whole. Their analysis forms part of the IMF staff ’s reporting on the member countries concerned.

FAD provides technical assistance (TA) to member countries both to enhance their fiscal performance and to strengthen their fiscal institutions. The bulk of FAD TA is provided in four areas:

■ Public financial management: legal and regulatory framework, budget management, medium-term expenditure framework, cash management, accounting, reporting, and debt management.

■ Tax policy: general tax policy reviews and specific tax policy advice, particularly in the areas of income tax, value-added tax, and taxation of natural resources, including oil and gas.

■ Revenue administration: tax and customs administration, social security contribution collection, and implementation of major tax policy changes.

■ Expenditure policy: short-term expenditure rationalization, social security reform and administration, and incorporation of cost-effective social safety nets into IMF-supported programs.

In addition, assistance is provided in macrofiscal management, public-private partnerships, fiscal risks, fiscal rules, fiscal transparency, and fiscal decentralization.

FAD’s Policy Work

FAD is the source of a wealth of policy-oriented analytical work, which is disseminated in several

ways.

A key publication is the IMF Fiscal Monitor, which forms part of the IMF’s World Economic and Financial Surveys. Issued twice a year (with interim quarterly updates), the Fiscal Monitor provides a comprehensive assessment of fiscal developments and prospects both globally and for various country groupings, including advanced and emerg-ing economies.

FAD staff also produce other cross-country policy analy-sis, including papers for the IMF’s Executive Board, Staff Discussion Notes, Working Papers, Occasional Papers, Technical Notes and Manuals, and books (available on the IMF’s website: www.imf.org), as well as contributions to major economic and public finance journals.

As part of its contributions to the global economic policy dialogue, FAD organizes a number of conferences and seminars each year. Chief among them is the Fiscal Forum (http://www.imf.org/external/np/seminars/eng/2012/fiscal/), which is held once a year and draws high-level policy makers from a cross section of IMF member countries. FAD staff also participate in international conferences and meetings where they present the department’s analysis and research.

FAD issues an e-newsletter quarterly to inform officials in member countries of its analytical and research work. Readers can subscribe by sending a request to [email protected]. FAD also maintains a Public Financial Management blog (http://blog-pfm.imf.org), which has a wide readership among officials and academics, and FAD’s Director, Carlo Cottarelli, is a regular blogger on iMFdi-rect (http://blog-imfdirect.imf.org).

FAD at Work

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FAD at Work

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Technical Assistance Delivery

FAD’s TA activities take different forms and are tailored to the circumstances of each member

country. Missions from headquarters constitute an important element of FAD’s TA. These missions work with the authorities (and other TA providers) in ana-lyzing the sources of weakness in fiscal institutions and drawing up an action plan to remedy these weaknesses. They also provide advice on fiscal policy design and implementation and help the authorities monitor the implementation of fiscal reforms. A report on findings and recommendations is provided to the authorities at the end of each mission. These reports are prepared for the authorities and shared only with the World Bank, but encouraged by the IMF, the authorities of the member country themselves may decide these reports should be more widely distributed. FAD TA also includes stand-alone expert assignments that assist countries in implementing mission recommendations. These assignments can be resident, short-term, peripa-tetic (i.e., repeat visits), or be fielded from the IMF’s Regional Technical Assistance Centers (RTACs). The distribution of missions and follow-up assistance through expert assignments is shown on the following two world maps.

FAD’s TA has been vital in countries affected by the recent global financial crisis. Intensive TA has been pro-vided in a number of policy areas critical to helping these countries respond and recover from the crisis. Examples include:

■ rationalizing government expenditures in the short run and strengthening pension systems (e.g., Belarus and Greece);

■ developing medium-term fiscal frameworks to tighten budget execution and expenditure controls and to improve cash and debt management (e.g., Greece, Iceland, Poland, Romania, and Serbia);

■ identifying tax policy options (e.g., Greece, Poland, and Romania); and

■ fortifying tax administration in response to sharp crisis-related revenue declines (e.g., Greece, Latvia, and Portugal).

TA of this kind has highlighted characteristics unique to FAD and IMF TA. First, such TA can respond quickly to urgent government requests—with specialized teams often in the field on short notice and sometimes ahead of other IMF operations. Second, the technical diagnostics and remedial recommendations can provide input to the design of IMF-supported programs.

TA provided by Regional Technical Assistance Centers (RTACs). To help deliver effective follow-up assistance and to support implementation of reforms proposed by missions from headquarters, the IMF has a network of eight RTACs covering about 90 countries in the Pacific (PFTAC), the Caribbean (CARTAC), East, West, Central, and Southern Africa (AFRITAC East, AFRITAC West, AFRITAC Central, and AFRITAC South), the Middle East (METAC), and Central America (CAPTAC). One additional center is planned, which will cover countries in Anglophone West Africa. Through a team of resident advi-sors, supplemented by short-term experts, each RTAC pro-vides TA in the core areas of the IMF’s expertise, including macrofiscal, public financial management, and revenue administration. Their work is part of FAD’s TA program and is subject to the same rigorous supervision and quality control as headquarter-led activities.

Topical Trust Funds. The IMF has launched two multi-donor topical trust funds supporting TA to members in Tax Policy and Administration (TPA TTF) and Man-aging Natural Resource Wealth (MNRW TTF). The assistance financed through these trust funds benefits from the IMF’s technical assistance infrastructure and proven expertise. It also provides a vehicle for donor coordination and commissioning focused policy devel-opment in these areas.

FAD at Work

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FAD at Work

Fiscal Monitor The Fiscal Monitor monitors and analyzes the latest public finance developments worldwide, updates fis-cal implications of the crisis and medium-term fiscal projections, and assesses policies to put public finances on a sustainable footing.

The Fiscal Monitor is one of the three IMF cross-country flagship publications, in addition to the World Economic Outlook (WEO) and the Global Financial Stability Report (GFSR). Two full reports are prepared each year together with two quarterly Updates. The Fiscal Monitor’s projections are based on the same da-tabase used for the WEO and GFSR. The publication and dataset are available at: http://www.imf.org/exter-nal/ns/cs.aspx?id=262 and also on the IMF eLibrary iPad app.

In addition to analyzing and surveying fiscal develop-ments, the Fiscal Monitor also identifies new medium-term fiscal challenges and provides policy options. For example, past reports included research on spending pressures arising from health care entitlements and reforms needed to contain these costs. Another study focused on the emerging risks to fiscal transparency, as temptations rise to supplement genuine fiscal adjust-ment with accounting stratagems. In addition, analysis and recommendations were provided on how “fis-cal devaluation,” that is, a revenue-neutral shift from direct to indirect taxation, can mimic the effects of an exchange rate depreciation and support more broad-based reforms that improve competitiveness.

Macrofiscal Analysis

FAD’s macrofiscal work includes cross-country analysis and monitoring, research on emerging

fiscal issues, and analytical support at the individual country level. The latter is achieved by assignment of FAD staff to area department teams to help analyze key policy issues.

In addition, FAD offers TA on various macrofiscal issues, including:

Macrofiscal modeling and the improvement of forecasts used for fiscal policy formulation and budget preparation.

Macroeconomics and the fiscal position, including ana-lyzing the impact of changes in the macroeconomic envi-ronment on the fiscal position, the impact of fiscal policy on macroeconomic outturns, the sustainability of fiscal policies and the design of fiscal adjustment plans, the impact of expenditure envelopes from a short-, medium-, and long-term perspective, fiscal-financial sector linkages, and the coordination of monetary and fiscal policy.

Guidance on fiscal policy formulation, including defin-ing the role of fiscal objectives and targets, coordinating policies across different levels of government, managing government assets and liabilities, and, designing rules-based fiscal frameworks, stabilization and savings mecha-nisms, and independent fiscal institutions.

Organizational aspects of the macrofiscal function, including defining the roles and responsibilities of minis-tries of finance, strengthening their capacity to carry out macrofiscal functions, and designing a macrofiscal unit.

Fiscal risk assessment, transparency and disclosure, and management, including advising on analytical methods as well as coordination and other institutional modalities.

Considerable synergies with other TA areas provide guid-ance in the design of specific tax and expenditure policies and institutions to achieve macrofiscal objectives.

The following boxes illustrate the diversity of FAD’s macrofiscal work.

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Fiscal Governance: Greater Role for Numerical Fiscal Rules and Fiscal CouncilsAdopting fiscal rules is one way that governments can help bridge the gap between lowering currently high fiscal imbalances and enhancing the credibility of overall fiscal consolidation. New analysis by FAD takes stock of numerical fiscal rules around the world and compiles a dataset—covering national and supranational fiscal rules in 81 countries from 1985 to end-March 2012 (Figures 1 and 2)—presenting details about the rules’ key design elements. This study allows governments to draw lessons from cross-country experiences in case they decide to adopt fiscal rules or amend existing ones. The dataset supports FAD’s technical assistance on fiscal governance while also serving as an input for research in this area. The link to the dataset and the accompanying Working Paper (WP/12/187) are available on imf.org at: http://

www.imf.org/external/pubs/cat/longres.cfm?sk=26094.0

Another way of promoting greater fiscal discipline and supporting increasingly more complex fiscal rules is setting up independent fiscal councils, entrusted with the task of monitoring fiscal policies and raising public awareness of their fiscal implications. Qualitative evidence suggests that such institutions have been instrumental in fostering democratic accountability in many advanced economies. Moreover, preliminary findings of on-going FAD research—using new indicators to measure the me-dia impact of fiscal council interventions—suggest that fiscal watchdogs tend indeed to react to budget slippages. Given the rising interest in setting up fiscal councils, FAD provides analysis and advice to member countries.

Macrofiscal Analysis

30%

Figure 2. Number of Countries with Fiscal Rules

0

20

40

60

80Supranational rules

National rules

All rule

201220102008200620042002200019981996199419921990

Figure 1. Countries with Fiscal Rules (National and Supranational), 2012

Figure 2. Number of Countries with Fiscal Rules

Source: National authorities; and IMF staff assessment.Note: Based on fiscal rules in effect by end-March 2012.

Source: National authorities; and IMF staff assessment.Note: Based on fiscal rules in effect by end-March 2012.

Number of Numerical Rules, 2012

NoneOneTwoThree or more

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Structural Fiscal Balances Adjusting fiscal balances for the output cycle is cru-cial for assessing fiscal sustainability. Other temporary factors beyond the output cycle may also affect fiscal balances, obscuring the underlying fiscal position. In recent years, policymakers have increasingly turned their attention to the structural fiscal balance to address these concerns. Structural fiscal balances provide a more accu-rate view of the underlying stance and sustainability of fiscal policy by correcting for a broad set of cyclical and transitory factors, including commodity shocks, asset prices, and other one-off factors.

The adjustment needs to take relevant country-specif-ic factors into account, including data availability, the structure of the economy, and the elasticity of reve-nues and expenditures to temporary factors. An FAD technical note (TNM/11/02) outlines several ap-

proaches that can be used to make such adjustments. The framework was recently supplemented with an Excel-based tool that contains default elasticity values for revenue and expenditure based on estimates derived from relevant studies in the literature. The tool also incorporates modules that allow for different types of structural adjustment to be applied individu-ally. This approach provides flexibility to make adjust-ments only for those factors relevant to the country under consideration.

The technical note, Excel-based tool, and further back-ground information are available at: http://www.imf.org/external/np/fad/strfiscbal/index.htm. An FAD team is also available at [email protected] to respond to further requests regarding the tool and the information provided on the website.

-7

-6

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

7

Overall Balance

Structural Balance

Business Cycle Effect

Asset Price Effect

Commodity Price Effect

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33%

36%

19%

12%

Western Hemisphere Region

36%

36%

24%

4%

Africa Region

30%

34%

26%

10%

Middle East and Central Asia Region

35%

29%

27%

9%

Asia and Pacific Region

39%

32%

30%

14%

15%European Region

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Technical Assistance Missions from the Fiscal Affairs Department

Policy Advice and Development of Fiscal Reforms and Action Plans

TA mission intensityNumber of Missions, FY2010-FY2012

No missionsLow: 1-2Medium: 3-4High: 5 or more

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33%

36%

19%

12%

Western Hemisphere Region

36%

36%

24%

4%

Africa Region

30%

34%

26%

10%

Middle East and Central Asia Region

35%

29%

27%

9%

Asia and Pacific Region

39%

32%

30%

14%

15%European Region

9

Topical distribution of TA missions by regionFY2010-FY2012

Revenue AdministrationPublic Financial ManagementTax PolicyOther

Size of pie indicates volume of TA.

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40%

56%

4%

Africa Region

56%2%

42%

European Region

61%34%

5%

Western Hemisphere Region

43%

7%

50%

Middle East and Central Asia Region

49%

51%

Asia and Pacific Region

ANTIGUA AND BARBUDA

GRENADA

ST. KITTS AND NEVIS

ANGUILLA

ST. LUCIAST. VINCENT AND THE GRENADINES

BELIZEHONDURAS

SURINAME

TRINIDAD AND TOBAGO

REPUBLICDOMINICAN

BAHAMAS

BERMUDA

TURKS & CAICOS

DOMINICA

MONTSERRATJAMAICA

EL SALVADOR

PANAMA

COSTA RICA

GUATEMALA

CAYMANISLANDS

BARBADOS

GUYANA

HAITI

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Medium and Long-term Assistance through Expert Assignments and Support

Strengthening Institutions and Fiscal Management Capacities

Intensity of expert and RTAC TA deliveryIn person years, FY2010-FY2012

No TALow: less than 0.5Medium: 0.5 - 1.5High: more than 1.5Member of an RTAC

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40%

56%

4%

Africa Region

56%2%

42%

European Region

61%34%

5%

Western Hemisphere Region

43%

7%

50%

Middle East and Central Asia Region

49%

51%

Asia and Pacific Region

TIMORL’ESTE

PAPUANEW GUINEA

SOLOMONISLANDS

PALAU

NAURU

MARSHALLISLANDS

FEDERATED STATES OF MICRONESIA

COOK ISLANDS

KIRIBATI

FIJI

TONGA

SAMOA

NIUE

TUVALU

VANUATU

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from Regional Technical Assistance Centers (RTACs)

Topical distribution of expert and RTAC delivery by regionFY2010-FY2012

Public Financial ManagementTax Policy and Revenue AdministrationOther

Size of pie indicates volume of TA.

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Tax Policy

FAD provides support to enhance the efficiency, fairness, and productivity of tax systems. FAD’s

advice covers the design and implementation of reforms of corporate and personal income taxes, taxes on capi-tal income and financial institutions, VAT and other indirect taxes, local property taxes, and—increasingly—work on fiscal regimes for natural resource extraction, and environmental taxes. Recent work includes:

Taxes and the global economic crisis. FAD has exten-sively analyzed the interactions of tax policy and the financial crisis, and the tax policy aspects of strategies to restore fiscal sustainability. This is reflected in both ana-lytical work and technical assistance to member countries.

Tax coordination, customs unions, and tax incentives. Increased trade and capital mobility, amplified by regional trade arrangements, necessitate improved tax coordina-tion. FAD assists regional organizations and country groups with these problems.

Financial markets and instruments. The department provides advice on taxation of financial instruments and institutions, as well as on tax aspects of capital market development.

Recurrent taxes on real property. An area of increasing concern for member countries is more effective use of these taxes, which are both economically efficient and equitable. The tax policy division advises on design and strategy for implementation of modern property tax systems.

International aspects of corporate taxation. The effects of bi-lateral tax treaties, transfer pricing, and international corporate income tax structures are increasingly relevant for both developing and industrial countries.

Interaction of the tax system and labor market outcomes. Recent work includes technical assistance advice and con-tributions to a departmental paper covering both tax and expenditure aspects of structural labor market problems.

Natural resources and environmental work Extractive industries. FAD completed 31 techni-cal assistance missions in this area in fiscal year 2012, partially utilizing donor financing available through the newly established Topical Trust Fund on Manag-ing Natural Resource Wealth (MNRW TTF). Techni-cal assistance on taxation of natural resources is diverse, focused on evaluation and design of fiscal regimes, and also including revenue administration, forecasting, and management. Tax policy advice assists in designing an efficient mechanism for capturing economic rents, enhancing government revenues while maintaining a fiscal regime attractive to investors. FAD undertakes extensive analytical work in the area and conducts workshops and conferences. The latest event was the Resources without Borders workshop, addressing inter-national issues for extractive industries.

Environmental taxation. FAD’s work emphasizes the economic rationale for using fiscal instruments (e.g., environmental taxes and emissions trading systems) to address environmental problems such as climate change and poor air quality. A recent FAD e-book provides guidelines for the design of fiscal policies to mitigate greenhouse gas emissions. A current project is assessing the magnitude of pollution and other exter-nalities to provide guidance on appropriate fuel tax lev-els for different countries. FAD also provides technical assistance in these areas.

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Analytical Work in Revenue Administration

RA-FIT This new data collection tool is building a global data-base of information about tax and customs administra-tions to provide baseline performance indicators and identify trends. Developed as a service and updated annually, RA-FIT will help member countries evaluate their revenue administrations against benchmarks, and in conjunction with other diagnostic tools, it will help them identify priorities for improvement, better coor-dinate reform efforts, and monitor results over time. The first phase consists in collecting information from one hundred low and lower middle-income countries. Aggregated baseline indicators, analyzed by region and country income group, will be published in 2013.

Tax Diagnostic ToolWork is underway to develop, with donor support, a tax administration diagnostic tool, modeled on the successful Public Expenditure and Financial Ac-countability (PEFA) tool used in evaluating public financial management. Building on the findings of a 2011 feasibility study, when fully operational by early 2014, this diagnostic tool will provide to countries, international organizations, and donors a consistent and shared understanding of the status of tax ad-ministration—the essential basis for designing more coordinated reform plans.

RA-GAPFAD’s revenue gap program is another way of assist-ing countries to measure the overall performance of revenue administration. This work involves a systematic evaluation of the difference between potential revenue collections and actual collections, given the policy settings in place and the factors contributing to this. Revenue gaps can be measured in terms of non-filing, non-payment and tax evasion by taxpayers, and the impact of measures such as tax expenditures.

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Revenue Administration

Modernizing revenue administration is a key objective in many countries. FAD provides TA in tax and customs administration to help design reform strategies to achieve optimal revenue levels at the lowest administrative and compliance cost.

Revenue administration management and organiza-tion. FAD tailors to country circumstances reforms aimed at administrative effectiveness and efficiency. These reforms include an effective headquarters that provides strategic planning and monitors field office activities against clear performance measures, and appropriate reform management arrangements to ensure success.

Tax administration. TA includes guidance to improve management and performance of specific taxes (e.g., VAT, income taxes, excises, and social contributions). It devel-ops segmentation strategies for different taxpayer groups, such as large business tax administration, and simplified regimes for small businesses. Assistance is also provided to strengthen core functions (e.g., audit, enforcement, filing, and payment), based on voluntary compliance, taxpayer self-assessment, effective taxpayer services, and well-designed IT strategies.

Customs administration. FAD TA reflects the interna-tional standards established by the World Customs and World Trade Organizations as well as the requirements of regional agreements. Many low-income countries rely on revenues from import taxes and duties, even as they un-dertake trade facilitation reforms to reduce costs and in-crease export competitiveness. FAD TA strategies balance both objectives by strengthening legislative and regulatory controls and simplifying procedures and improving basic revenue assessment and collection.

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Strong Public Finance Management (PFM) systems are key to ensuring effective delivery of

intended budget policies. FAD’s TA in the PFM area focuses on:

Comprehensive assessment of PFM systems. FAD pro-vides in-depth, diagnostic analysis of the efficiency, effec-tiveness, and transparency of PFM systems through in-struments such as TA missions, reports on the observance of standards and codes (ROSCs), and public expenditure and financial accountability (PEFA) assessments.

Basic PFM systems. Advice is provided to member countries to enhance the budget as the central instru-ment for fiscal management and the allocation of public resources. Issues treated include budget coverage, particu-larly the integration of extra-budgetary and quasi-fiscal activities; the budget formulation process; treasury sys-tems; expenditure and revenue classification; accounting and fiscal reporting; cash management and commitment control; and internal control and audit.

More advanced reforms. Depending on the level of devel-opment of a member country, FAD promotes the adop-tion of best practices, such as integrating the budget into a medium-term fiscal and budgeting framework; program and performance budgeting; and accrual accounting.

Legislative and regulatory drafting. The department assists in preparing budget system laws and fiscal respon-sibility legislation in cooperation with the IMF’s Legal Department.

Restructuring of central finance agencies. FAD pro-vides expertise in the re-organization of state treasuries and debt and cash management offices, and advises on how to reshape a ministry of finance as a whole to be-come an effective manager of public resources.

Mexico

ChallengeThe Treasury Department (TESOFE) of the Secretary of Finance and Public Debt (SHCP) of Mexico has been implementing a modernization reform of treasury management in line with international best practices since 2007. This reform includes modernizing the financial management information system, improving the legal and regulatory framework, improving cash flow forecasting and liquidity management, and docu-menting procedures and processes.

ApproachFAD has helped TESOFE by providing high-level advice through a programmatic approach that included headquarters missions, short-term expert visits, semi-nars and workshops. FAD is also supporting the forum of Latin American treasury departments through an annual seminar and preparation of studies of com-mon interest. The technical notes and manuals on the preparation of a business continuity plan and on the relationship between treasuries and central banks are two examples.

ResultsThe main outputs so far are:

■ The coverage of the treasury single account (TSA) has been broadened.

■ Cash planning, cashflow forecasting, and liquidity management have been improved.

■ A business continuity plan and an operational risk assessment framework have been implemented.

■ The TSA has brought important savings on bank services, improved monitoring and control of bud-getary savings through improved cash management, enhanced the capacity of treasury officials, and improved documentation of procedures and systems.

Public Financial Management

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Mexico City, Mexico

Monrovia, Liberia

Liberia

ChallengeLiberia emerged from conflict in 2003 with shattered institutions and without a framework for running an effective budget. Early efforts, supported by FAD and others, focused on re-establishing basic Public Financial Management (PFM). Encouraged by early successes, Liberia is now in a second round of more advanced PFM reforms.

ApproachFAD responded quickly to a request for technical advice from Ellen Johnson Sirleaf ’s newly elected gov-ernment, starting with a diagnostic mission in 2007 to consolidate basic PFM controls, and follow up TA on drafting a new PFM legal framework. A second mis-sion in 2009 made recommendations on implementing the new PFM Act and helped launch the next phase of reforms, with follow-up provided by a resident PFM advisor funded by Japan as well as expert visits. In 2010, FAD selected Liberia to pilot a new program-matic approach to TA, with a three-year work program linked to specific donor funding—Sweden and Euro-pean Union for the PFM component.

Results ■ Liberia re-established control over public finances,

avoided new arrears, completed the HIPC process, and introduced an employee direct deposit scheme to limit payroll risks. This result is highlighted in the IMF video “Africa Rebuilds: IMF Technical As-sistance in Liberia” available at http://www.imf.org/external/mmedia/view.aspx?vid=1082523636001.

■ Liberia’s 2009 PFM Act created, for the first time in over 30 years, a comprehensive legal framework to guide PFM, anchoring all subsequent reforms.

■ The 2011 PFM reform strategy provides a focal point for donor funding, including $28 million re-cently signed by Sida, World Bank, African Devel-opment Bank, and USAID.

■ Liberia’s 2012/13 medium-term budget framework provides a clear policy link between the budget and the Poverty Reduction and Growth Strategy.

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The Economics of Public Health Care Reform in Advanced and Emerging EconomiesIn advanced economies, public expenditure on health is putting enormous pressure on government budgets and is expected to rise further. In emerging economies, spending is much lower, but health insurance coverage is incomplete; for these economies, health care must be expanded in a fiscally sustainable manner.

A new FAD book, The Economics of Public Health Care Reform in Advanced and Emerging Economies, analyzes the outlook for public health expenditure in the next 20 to 40 years and the options for health care reform in both advanced and emerging economies, drawing on lessons from across the globe. The analysis is based on econometric analysis, event analysis, and detailed case studies of 18 economies.

Dana P. Goldman, Professor and Norman Topping Chair in Medicine and Public Policy, University of Southern California, suggests “…This book is a must-read for anyone interested in understanding the extent of the global health crisis…and what nations can do about it.”

The Economics of Public Health Care Reform in Advanced and Emerging Economies, ed. by B. Clements, D. Coady, and S. Gupta (IMF, 2012). The book can be down-loaded free from the Fund’s website.

Expenditure Policy

The quality of spending has a direct bearing on growth and social development in IMF mem-

ber countries. FAD provides a range of analytical and advisory services in this area:

Expenditure efficiency. The department, where appropri-ate in close collaboration with the World Bank, provides advice on short-term expenditure rationalization, aimed at identifying sustainable ways of raising the efficiency of public spending. Advice is provided on employee com-pensation, pensions and other social insurance, health and education spending, subsidies, and social assistance.

Equity and social spending. The department is engaged in work on the effects of fiscal policy on equity and the impact of Fund-supported programs on health and edu-cation spending.

Social safety nets. Advice is provided on incorporating cost-effective social safety nets during fiscal adjustment. This has included technical assistance and policy work on how to protect the poor during subsidy reform.

Public-private partnerships (PPPs). TA to member countries on PPPs aims at helping countries manage the fiscal risks of PPPs, in particular through strengthening institutional capacity and transparency.

Age-related spending. Fiscal consolidation efforts in advanced and emerging economies will require that countries confront spending pressures on public health and pensions. TA on pension reform and FAD’s policy work are helping countries meet this challenge, including a new book on health reform (see Box).

Fiscal policy and employment. The department is en-gaged in policy work assessing the impact of expenditure and tax reforms to boost employment.

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Selected Recent Publications

IMF Fiscal Monitor Fiscal Monitor Update: Nurturing Credibility While Man-

aging Risks to Growth, Fiscal Affairs Department, International Monetary Fund, Washington DC, July 2012.

Fiscal Monitor: Balancing Fiscal Policy Risks, Fiscal Affairs Department, International Monetary Fund, Washing-ton DC, April 2012.

Fiscal Monitor Update: As Downside Risks Rise, Fiscal Policy Has To Walk a Narrow Path, Fiscal Affairs De-partment, International Monetary Fund, Washington DC, January 2012.

Fiscal Monitor: Addressing Fiscal Challenges to Reduce Eco-nomic Risks, Fiscal Affairs Department, International Monetary Fund, Washington DC, September 2011.

IMF Staff Discussion Notes Income Inequality and Fiscal Policy, F. Bastagli, D. Coady,

and S. Gupta, SDN/12/08, 2012.

Fiscal Frameworks for Resource Rich Developing Countries, T. Baunsgaard, M. Villafuerte, M. Poplawski-Ribeiro, and C. Richmond, SDN/12/04, 2012.

Accounting Devices and Fiscal Illusions, T. C. Irwin, SDN/12/02, 2012.

What Happens to Social Spending in IMF-Supported Programs? B. Clements, S. Gupta, and M. Nozaki, SDN/11/15, 2011.

IMF Books and Occasional Papers Policy to Mitigate Climate Change: A Guide for Policymak-

ers, ed. by R. de Mooij, I. W.H. Parry, and M. Keen, 2012.

The Economics of Public Health Care Reform in Advanced and Emerging Economies, Benedict J. Clements, David Coady, and Sanjeev Gupta, June 2012.

Chipping Away at Public Debt, Sources of Failure and Keys to Success in Fiscal Adjustment, ed. by P. Mauro, Wiley, 2011.

IMF Technical Notes and Manuals Operational Risk Management and Business Continuity

Planning for Modern State Treasuries, No. 5, I. Storkey, 2011.

Treasury Single Account: An Essential Tool for Government Cash Management, No. 4, S. Pattanayak and I. Fain-boim, 2011.

Chart of Accounts: A Critical Element of the Public Financial Management Framework, No. 3, J. Cooper and S. Pat-tanayak, 2011.

IMF Working Papers “Fiscal Rules in Response to the Crisis—Toward the

“Next-Generation” Rules. A New Dataset,” A. Schaechter, T. Kinda, N. Budina, and A. Weber, WP/12/187, 2012.

“Foreign Aid and Revenue: Still a Crowding Out Effect?” D. Benedek, E. Crivelli, S. Gupta, and P. Muthoora, WP/12/186, 2012.

“Great Recession and Fiscal Squeeze at U.S. Sub-national Government Level,” J. Jonas, WP/12/184, 2012.

“Quality of Government and Living Standards: Adjusting for the Efficiency of Public Spending,” F. Grigoli and E. Ley, WP/12/182, 2012.

“Environmental Tax Reform: Principles from Theory and Practice to Date,” D. Heine, J. Norregaard, and I. W.H. Parry, WP/12/180, 2012.

“Public Expenditure in the Slovak Republic: Composi-tion and Technical Efficiency,” F. Grigoli, WP/12/173, 2012.

“The Impact of Longevity Improvements on U.S. Corpo-rate Defined Benefit Pension Plans,” M. Kisser, J. Kiff, E. S. Oppers, and M. Soto, WP/12/170, 2012.

“Quantifying Impact of Aging Population on Fiscal Space,” S. G. Park, WP/12/164, 2012.

“Fiscal Transparency, Fiscal Performance and Credit Rat-ings,” E. Arbatli and J. Escolano, WP/12/156, 2012.

“Financial Intermediation Costs in Low-Income Coun-tries: The Role of Regulatory, Institutional, and Macro-economic Factors,” T. Poghosyan, WP/12/140, 2012.

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Selected Recent Publications

“Walking Hand in Hand: Fiscal Policy and Growth in Advanced Economies,” C. Cottarelli and L. Jaramillo, WP/12/137, 2012.

“Appraising Credit Ratings: Does the CAP Fit Bet-ter than the ROC?” R. J. Irwin and T. C. Irwin, WP/12/122, 2012.

“Fiscal Consolidation in Southeastern European Coun-tries: The Role of Budget Institutions,” B. Olden, D. Last, S. Yläoutinen, and C. Sateriale, WP/12/113, 2012.

“Narrowing Vertical Fiscal Imbalances in Four European Countries,” I. Karpowicz, WP/12/91, 2012.

“’Fiscal Devaluation’ and Fiscal Consolidation: The VAT in Troubled Times,” R. de Mooij and M. Keen, WP/12/85, 2012.

“Debt, Taxes, and Banks,” M. Keen and R. de Mooij, WP/12/48, 2012.

“Fiscal Performance, Institutional Design and Decentral-ization in European Union Countries,” J. Escolano, L. Eyraud, M. Moreno Badia, J. Sarnes, and A. Tuladhar, WP/12/45, 2012.

“Stock-Flow Adjustments and Fiscal Transparency: A Cross-Country Comparison,” A. Weber, WP/12/39, 2012.

“Macroeconomic and Welfare Costs of U.S. Fiscal Imbal-ances,” B. Gruss and J. L. Torres, WP/12/38, 2012.

“A Partial Race to the Bottom: Corporate Tax Develop-ments in Emerging and Developing Economies,” S. M. Ali Abbas and A. Klemm, with S. Bedi and J. Park, WP/12/28, 2012.

“Pricing of Sovereign Credit Risk: Evidence from Ad-vanced Economies during the Financial Crisis,” C. E. Alper, L. Forni and M. Gerard, WP/12/24, 2012.

“Central Banks Quasi-Fiscal Policies and Inflation,” S.G. Park, WP/12/14, 2012.

“A Toolkit to Assessing Fiscal Vulnerabilities and Risks in Advanced Economies,” by a staff team led by A. Schaechter, with C. E. Alper, E. Arbatli, C. Caceres, G. Callegari, M. Gerard, J. Jonas, T. Kinda, A. Shabunina, and A. Weber, WP/12/11, 2012.

“Oil Exporters’ Dilemma: How Much to Save and How Much to Invest,” R. Cherif and F. Hasanov, WP/12/04, 2012.

“Who’s Going Green and Why? Trends and Determi-nants of Green Investment,” L. Eyraud, A. Wane, C. Zhang, and B. Clements, WP/11/296, 2011.

“Evaluating Designs for a Fiscal Rule in Bulgaria,” J. R. Andritzky, WP/11/272, 2011.

“Assessing the Variability of Tax Elasticities in Lithu-ania,” T. Poghosyan, WP/11/270, 2011.

“The Puzzle of Persistently Negative Interest Rate-Growth Differentials: Financial Repression or Income Catch-Up?” J. Escolano, A. Shabunina, and J. Woo, WP/11/260, 2011.

“Decentralizing Spending More than Revenue: Does It Hurt Fiscal Performance?” L. Eyraud and L. Lusinyan, WP/11/226, 2011.

“Spatial Spillovers in Emerging Market Spreads,” E. Baldacci, S. Dell’Erba and T. Poghosyan, WP/11/221, 2011.

“Efficiency-Adjusted Public Capital and Growth,” S. Gupta, A. Kangur, C. Papageorgiou and A. Wane, WP/11/217, 2011.

“Public Debt in Advanced Economies and its Spillover Effects on Long-term Yields,” C. E. Alper and L. Forni, WP/11/210, 2011.

“The Taxation and Regulation of Banks,” M. Keen, WP/11/206, 2011.

“Public Debt Targeting An Application to the Carib-bean,” A. Guerson and G. Melina, WP/11/203, 2011.

“Burkina Faso—Policies to Protect the Poor from the Impact of Food and Energy Price Increases,” J. Arze del Granado and I. Adenauer, WP/11/202, 2011.

“Taxing Financial Transactions: An Assessment of Administrative Feasibility,” J. Brondolo, WP/11/185, 2011.

“Customs Administration Reform and Modernization in Anglophone Africa - Early 1990s to Mid-2010,” J. Zake, WP/11/184, 2011.

“Democratic Accountability, Deficit Bias, and Indepen-dent Fiscal Agencies,” X. Debrun, WP/11/173, 2011.

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Career OpportunitiesThe Fiscal Affairs Department (FAD) seeks talented and dedi-cated professionals, with a background in different areas of public finance, to work on macrofiscal policy issues and to provide techni-cal assistance advice to IMF member countries on public financial management, tax policy reform, revenue administration, and various expenditure policy issues. Vacancies in FAD for staff and long-term expert positions are posted on http://www.imf.org/external/np/adm/rec/job/howtoap.htm.

FAD also seeks experts who are interested in occasional short-term (i.e., 2-3 week) assignments. More information is available at http://www.imf.org/external/np/adm/rec/job/shortexp.htm and inter-ested candidates may send their CVs to [email protected].

Selected Recent Publications

Papers in Academic Journals “Reassessing the fiscal mix for successful debt reduction,”

E. Baldacci, S. Gupta, C. Mulas-Granados, Economic Policy, Vol. 27(71), pp. 365-406, July 2012.

“Reforming the tax system to promote environmental ob-jectives: An application to Mauritius,” I. Parry, Ecologi-cal Economics, Vol. 77, pp. 103–12, May 2012.

“On the Drivers of FDI and Portfolio Investment: A Simultaneous Equations Approach,” T. Kinda, Inter-national Economic Journal, Vol. 26(1), pp. 1–22, March 2012.

“How Much Inequality is Necessary for Growth?” Fuad Hasanov, Harvard Business Review, January-February 2012.

“Endogenous timing in general rent-seeking and conflict models,” M. Hoffmann and G. Rota-Graziosi, Games and Economic Behavior, Vol. 75, pp. 168–84, December 2011.

“Historical Patterns and Dynamics of Public Debt—Evi-dence From a New Database,” S M. Ali Abbas, N. Bel-hocine, A. El-Ganainy, and M. Horton, IMF Economic Review, Vol. 59(4), pp. 717-42, December 2011.

“Fiscal Policy and the Current Account,” S M. Ali Ab-bas, J. Bouhga-Hagbe, A. Fatás, P. Mauro and R. C. Velloso, IMF Economic Review, Vol. 59(4), pp. 603-29, December 2011.

“The Distributional Implications of Income Under-Re-porting in Hungary,” D. Benedek and O. Lelkes, Fiscal Studies, Vol. 32(4), December 2011.

“International fuel tax assessment: an application to Chile,” I. Parry and J. Strand, Environment and De-velopment Economics, Vol. 17, pp. 127-44, November 2011.

“Climate Policy in Crisis and Recovery,” B. Jones and M. Keen, Journal of International Commerce Economics and Policy, Vol. 2(1), pp.103-19, June 2011.

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20

Contacts

Marco CangianoAssistant Director and Division Chief,

Public Financial Management IAnglophone Africa, Middle East and Central Asia, and Europe

[email protected]

Johannes MuellerAssistant Director and Division Chief,

Public Financial Management IIAsia and the Pacif ic, Western Hemisphere, and

non-Anglophone countries in [email protected]

Martine GuerguilAssistant Director and Division Chief,

Fiscal Policy and [email protected]

Abdelhak SenhadjiAssistant Director and Division Chief,

Fiscal Operations [email protected]

Bernardin AkitobyDivision Chief,

Fiscal Operations [email protected]

Juan ToroDivision Chief, Revenue Administration I

Asia and the Pacif ic, Middle East and Central Asia, and Europe

[email protected]

Katherine BaerDivision Chief, Revenue Administration II

Africa and Western [email protected]

Victoria PerryDivision Chief, Tax Policy

[email protected]

Benedict ClementsDivision Chief, Expenditure Policy

[email protected]

Julio EscolanoAdvisor

[email protected]

Kiyoshi NakayamaAdvisor

[email protected]

Kentaro OgataAdvisor

[email protected]

Brian ChristensenDivision Chief, Resource and Information Management

[email protected]

Carlo CottarelliDirector

[email protected]

Sanjeev GuptaDeputy Director

TA to [email protected]

Gilbert TerrierDeputy Director

TA to Western [email protected]

Gerd SchwartzDeputy Director

TA to [email protected]

Philip GersonDeputy Director

TA to Asia and Pacif ic [email protected]

Michael KeenDeputy Director

TA to Middle East and Central [email protected]

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f

On the Cover

Effects of Good Government

by Ambrogio Lorenzetti

Siena, Italy, 1338-1339.

DVD Content1. Voices from Senior Country Officials on Advisory Services

2. Africa Develops: IMF Technical Assistance in Mali (English and French)

3. Africa Rebuilds: IMF Technical Assistance in Liberia

4. The Economics of Public Health Care Reform in Advanced and Emerging Economies

5. Back to the Future: A History of Global Debt

6. Chipping Away at Public Debt

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Fiscal Affairs Department

International Monetary Fund

700 19th Street, NW

Washington DC 20431