In July the Fiscal Affairs department (FAD) of the IMF published the first of a series of regular updates on global fiscal developments and prospects, based on the approaches introduced in The State of Public Finances: Outlook and Medium-Term Policies After the 2008 Crisis. The new series, called the Fiscal Monitor, examines developments in a variety of country groups, with somewhat more emphasis on G-20 countries. The next issue of the Monitor is expected to be released in the second half of October.

In a joint conference with the Research Department of the IMF in early June, FAD brought together leading academics, policymakers and practitioners to discuss the effectiveness of fiscal policy in stimulating economic activity. Focusing on the current crisis, the conference analyzed implementation lags, assessed the role of automatic stabilizers, examined the impact of quantitative easing on interest rates, and investigated the role of fiscal rules and independent councils in anchoring expectations about government solvency.

FAD staff continued their work on the relationships between fiscal policy and the financial crisis. An FAD paper concluded that market confidence in governments’ solvency is a key source of stability and a precondition for economic recovery; therefore, while fiscal policy should continue to support aggregate demand, governments should clarify their strategies to normalize fiscal conditions when the moment comes.

Did taxation play any role in the financial crisis? That is the question addressed by FAD staff in a recent paper for the IMF Executive Board, which concluded that tax distortions may well have encouraged excessive leveraging at both corporate and household levels, enhanced opacity, and caused other financial market problems.

FAD staff contributed to two Notes prepared by the IMF staff in March and June for the G-20 meetings in London and Basle. The main fiscal conclusions were that fiscal support needs to be anchored in a sustainable medium-term fiscal framework and that countries should ensure timely and effective implementation of the substantial fiscal stimulus in the pipeline, along with stepped up efforts to anchor medium-term expectations.

The importance of fiscal risks during the crisis was analyzed in a Staff Position Note prepared by FAD staff in July. Its key recommendation is that countries should regularly prepare and publish a statement of fiscal risks, including the different types of risks related to previously announced public interventions in support of the financial sector.

A Staff Position Note, prepared jointly by FAD and the IMF’s African and Research Departments, examined the main channels through which the global financial crisis is likely to affect countries in sub-Saharan Africa and discussed the considerations that should guide policymakers in framing sound fiscal policy responses to the crisis.

A Working Paper concluded that the global financial crisis is having a negative impact on pipeline projects through public-private partnerships (PPPs). To limit government's exposure to risk, intervention measures should be consistent with the wider fiscal policy stance, be contingent on specific circumstances, and be adequately costed and budgeted.

In considering the challenges faced by tax agencies during the financial crisis, a Staff Position Note identified the principal components of a new tax compliance strategy, drawing on practices from leading tax agencies and experiences from IMF technical assistance. The paper also highlighted emerging tax compliance issues in the financial sector.

A paper prepared for the IMF Executive Board jointly by FAD and the Monetary and Capital Markets Department examined the fiscal and financial risk implications of support measures in a sovereign balance sheet framework. It suggested some key principles for efficient and transparent management of new assets, liabilities, and associated risks, and for moving toward an orderly disengagement.

In June, FAD hosted a seminar on tax incentives in Tokyo, in collaboration with the IMF Regional Office for Asia and the Pacific. The seminar discussed the circumstances under which tax incentives can be used to facilitate sustainable long-term growth.

A Working Paper discussed policy options for dealing with corporate tax competition and trade liberalization in Sub-Saharan Africa. For the period 1980-2005, it found that non-resource revenues have been essentially stagnant, corporate tax revenues have held up, and trade tax revenue reductions have been largely offset by other measures.

In early June, FAD conducted a high-level seminar at the Joint African Institute on strategic planning and management. The main topics included: risk assessment and management; priority setting and resource allocation; business planning; and plan monitoring and execution.

In early June, FAD hosted a seminar for the heads of tax agencies from 6 Southeast European countries (Albania, Bosnia & Herzegovina, Kosovo, Macedonia, Slovenia) and Hungary. Participants welcomed a new strategy proposed by FAD, which would include a number of modalities for Technical Assistance delivery in Revenue Administration, including regional advisors, short-term advisors, and headquarter missions.

In May, FAD hosted the International Public Sector Accounting Standards Board (IPSASB) second meeting of the year at the IMF’s Washington, DC headquarters and in June the semi-annual meeting of the Public Expenditure and Financial Accountability (PEFA) Steering Committee. The IPSASB meeting established a closer cooperation between IMF staff and the IPSAS Board, whereas the PEFA meeting focused on technical refinements and confirmed the program’s close and continuing engagement with the OECD-DAC in pursuing the Paris Declaration objectives and the Accra Action Agenda on PFM issues.