Public Investment and Fiscal Policy

Public Investment and Fiscal Policy

Prepared by the Fiscal Affairs Department and the Policy Development and Review Department

(In consultation with other departments and in cooperation with the World Bank and the Inter-American Development Bank)

Approved by Teresa Ter-Minassian and Mark Allen

March 12, 2004

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Contents

Executive Summary

I.	Introduction

II.	Public Investment and Growth

III.	The Analytical Framework
	A.	Targeting the Overall Fiscal Balance and Public Debt
	B.	Targeting the Current Fiscal Balance
	C.	Safeguarding Public Investment, Macroeconomic Stability, and Debt Sustainability

IV.	The Coverage of Fiscal Indicators and Targets
	A.	The Current Approach to Coverage
	B.	An Improved Approach to Coverage

V.	Public-Private Partnerships
	A.	Background
	B.	Accounting for and Reporting PPP Operations

VI.	Conclusions and Next Steps

VII.	Issues for Discussion

Figures
1.	Investment Trends in Advanced OECD and Selected Latin American Countries, 1970–2000
2.	Investment Trends in Selected Asian and African Countries, 1970–2000
3.	Coverage of Fiscal Statistics and Targets in Staff Reports and Fund-Supported Programs

Boxes
1.	Approaches to Coverage in Brazil and Turkey
2.	Criteria for Assessing Whether Public Enterprises Are Commercially Run

Appendices
1.	Studies of Public Investment and Growth
2.	Budget Rules and Public Debt Dynamics
3.	The Government Finance Statistics Manual 2001 Analytical Framework
4.	Commercial Orientation of Public Enterprises in Colombia

Appendix Figure
4.	Public Investment and Growth, 1970–2000

Appendix Tables
1.	The Effect of Public Investment on Output, Productivity, and Growth
2.	Colombia: Commercial Orientation of Public Enterprises

References