## Fiscal Monitor: Fiscal Policy from Pandemic to War (April 2022) — text

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### Projections and Methodology
- Projections are IMF staff projections drawn from the same database used for the April 2022 World Economic Outlook and Global Financial Stability Report.
- Fiscal projections refer to the general government, unless otherwise indicated.
- Short-term projections are based on officially announced budgets, adjusted for differences between national authorities and IMF staff regarding macroeconomic assumptions.
- Projections incorporate policy measures judged by IMF staff as likely to be implemented; for countries supported by an IMF arrangement, projections are those under the arrangement.
- Where IMF staff has insufficient information to assess authorities’ budget intentions and policy implementation prospects, an unchanged cyclically adjusted primary balance is assumed, unless indicated otherwise.

### Macroeconomic and Fiscal Context: Pandemic, Recovery, and War
- Since early 2020, fiscal policy delivered large-scale support during the Great Lockdown that prevented a much deeper recession.
- Exceptional monetary accommodation complemented fiscal actions; together they prevented deflation in the early pandemic stages.
- Unprecedented policy support plus supply disruptions led to demand recovering faster than supply; inflation surprises began to accumulate in 2021.
- Russia’s invasion of Ukraine reintroduced major uncertainty and triggered spikes in energy and food prices on top of already elevated levels.
- As interest rates are raised to keep inflation in check, fiscal space becomes more constrained.

### Fiscal outlook, debt projections, and key numeric highlights
- Global and aggregate debt projections (selected entries from Table 1.2 and tables):
  - World gross debt: 82.0 (2017), 95.5 (2027).
  - Advanced Economies gross debt: 103.2 (2017), 112.7 (2027).
  - Japan gross debt: 231.4 (2017), 261.8 (2027).
  - United States gross debt: 106.2 (2017), 127.4 (2027).
  - Emerging Market Economies gross debt: 50.5 (2017), 77.2 (2027).
  - Low-Income Developing Countries gross debt: 42.1 (2017), 45.9 (2027).
  - World net debt: 67.3 (2017), 78.2 (2027).
  - Advanced Economies net debt: 74.5 (2017), 86.7 (2027).
  - United States net debt: 80.3 (2017), 105.6 (2027).
  - Emerging Market Economies net debt: 36.0 (2017), 44.6 (2027).
- Fiscal outlook and group projections:
  - Deficits are falling globally but are expected to remain above prepandemic levels.
  - Average public debt in advanced economies is projected to decline to 113 percent of GDP by 2024.
  - Public debt in emerging markets is projected to continue to rise, mainly driven by China, reaching 72 percent of GDP by 2024.
  - Among low-income developing countries, debt is expected to gradually decline to 48 percent of GDP by 2024.
  - Public debt in commodity (oil) exporters is expected to fall from almost 56 percent of GDP in 2021 to 50 percent of GDP in 2024 due to positive terms-of-trade shocks.
  - Total (public plus nonfinancial private) debt rose by 28 percentage points in 2020 to 256 percent of global GDP.
  - Government debt now accounts for 40 percent of total global debt.
- Emerging markets and medium-term specifics:
  - Overall deficits in emerging markets (excluding China) are expected to decline, on average, by less than 1 percent of GDP during 2022.
  - Commodity exporters: primary balance expected to improve from a deficit of 2.3 percent of GDP in 2021 to a surplus of almost 2 percent of GDP in 2022; debt projected to decline from 50 percent of GDP in 2021 to 43 percent of GDP in 2022.
  - China: fiscal deficits projected to hover around 7 percent of GDP and public debt to rise from 73 percent of GDP in 2021 to around 86 percent of GDP by 2024 (compared with 57 percent of GDP the year prior to the pandemic).
  - South Africa: debt-to-GDP ratio projected to surpass 75 percent in the next two years.
  - Average gross financing needs for emerging markets (excluding China) expected to decline by about 0.5 percent of GDP in 2022 compared to 2021.
  - Over the medium term, average gross interest bill projected to increase from about 3 to 3.5 percent of GDP.

### Inflation surprises, interest rates, and debt-service dynamics
- Inflation surprises reduced public debt-to-GDP ratios in 2021 by:
  - 1.8 percentage points of GDP in advanced economies (2021).
  - 4.1 percentage points of GDP in emerging markets excluding China (2021).
- A surprise of 1 percentage point in the annual inflation rate could increase nominal revenues by 0.8 percent in emerging markets and 0.3 percent in advanced economies.
- For advanced economies: for each increase of 100 basis points in the policy rate, the effective interest rate for the government rises by about 30 basis points one year later.
- An increase of one standard deviation in inflation volatility can increase long-term government bond yields by 0.5 percentage points in 3 years.
- Short-term inflation relief via higher nominal revenues is usually temporary; higher inflation expectations and volatility can raise sovereign borrowing costs and tighten fiscal space.

### Debt, financial stability, and vulnerabilities
- When global credit conditions tighten, the most vulnerable countries suffer the biggest squeeze; “Some emerging market spreads have reached dangerous territory, and 60 percent of the lowest-income economies are already in or at high risk of debt distress.”
- The Debt Service Suspension Initiative (DSSI) expired end-2021; the G20 Common Framework has yet to deliver on its promise.
- During the pandemic, the rise in sovereign debt in emerging markets was financed largely by domestic banking sectors, deepening sovereign–bank linkages and raising the risk of adverse feedback loops as sovereign assets come under stress.
- Global public debt expected to stabilize at around 94 percent of GDP during 2022–24, well above prepandemic levels.

### Poverty, refugees, household savings, and distributional effects
- An estimated 70 million more people (relative to the prepandemic trend) experienced extreme poverty in 2021.
- If inequality rises, poverty will be higher: an increase of 1 percent in the Gini coefficient would add 20 million more people in extreme poverty in 2021.
- Refugees: since the war started, more than 4.5 million refugees have fled Ukraine as of April 10; another figure notes more than 4.2 million individuals have fled Ukraine as of April 3 (text reports both dates/figures).
- Household savings:
  - Household savings rose sharply relative to prepandemic levels—by a combined $3½ trillion in the United States and the European Union during 2020–21.
  - Excess savings (above pre-pandemic trends) estimated at approximately $2.5 trillion in the United States and $1 trillion in the European Union during 2020–21.
- Government programs’ effects:
  - United States: Supplemental Poverty Measure rate was 9.1 percent of the population in 2020, 2.6 percentage points lower than in 2019.
  - Brazil: emergency social assistance reduced the number of poor individuals from 23 million in 2019 to 9.8 million in September 2020, then around 27.7 million in early 2021 as exceptional support was reduced.
  - Mexico: modest increase in support in 2020 of 0.7 percent of GDP; Mexico’s extreme poverty rose by about 2 million between 2018 and 2020.

### Policy guidance for energy and food price shocks
- Overarching principle: protect people from the worst consequences of energy and food price spikes with policies that are timely, targeted, and temporary, while allowing domestic prices to adjust to spur additional supply and avoid shortages.
- Recommended policy options:
  - Targeted and temporary transfers where possible.
  - Where social safety nets and information systems are incomplete, consider smoothing consumption bills or lump-sum utility bill discounts.
  - Ensure access to adequate nutrition for everybody; where needed, pass-through can be gradual (for example for the prices of staple foods and cooking fuels).
  - Prefer unconditional cash transfers or lump-sum conditioned benefits over proportional benefits to reduce distortions and increase progressivity.
  - Release food reserves, reassess incentives diverting crops to biofuel production, expand school feeding programs, and consider geographic or age targeting where administrative capacity is limited.
- Fiscal risks and historical comparisons:
  - During the 2008 global food price crisis, more than 80 countries reduced food taxes between 2006 and 2008; fiscal cost of measures reached more than 0.5 percent of GDP in available cases and up to 1.1 percent of GDP in some cases.
- Findings on policy costs and distribution:
  - Generalized price subsidies are costly, disproportionately benefit higher income households, can exacerbate global imbalances, raise international prices, and lead to shortages.

### Country policy differentiation and fiscal strategies
- Advanced economies with stronger growth and elevated inflation: shift fiscal policy from exceptional pandemic support toward normalization; many are projected to increase public investment by 0.5 percentage points of GDP in the medium term relative to prepandemic forecasts.
- Economies hardest hit by the war and sanctions: prioritize humanitarian response and targeted support given rising inflation and interest rates; where growth deteriorates significantly and fiscal space exists, broader temporary support could be appropriate.
- Emerging markets and low-income developing countries: face harsher trade-offs—higher inflation and tightening global financial conditions call for prudence while protecting those hardest hit; prioritize spending and raise revenues where financing is tight or debt distress is high.
- Commodity exporters benefiting from higher prices: should rebuild buffers given inflationary pressures and commodity price uncertainty.

### Coordinating taxation across borders (Chapter 2) — corporate tax, taxes on individuals, and carbon pricing
- Corporate tax coordination — two-pillar Inclusive Framework agreement (October 2021):
  - To date, 137 jurisdictions (of 141 Inclusive Framework members) have joined the two-pillar Inclusive Framework agreement.
  - Pillar 1:
    - Allocates a portion of profits to market jurisdictions even without physical presence.
    - Applies to multinationals with global turnovers above €20 billion.
    - Allocates 25 percent of “excess” or “residual” profit (profits exceeding 10 percent of global revenue) to market jurisdictions using sales by destination.
    - Estimated to apply to about 140 companies, capturing a small global tax base of 2 percent of global profit (about $150 billion).
    - Revenue reallocation raises revenues by 0.7 and 0.9 percent of corporate tax revenues in low-income countries and advanced economies, respectively.
  - Pillar 2:
    - Agreement on a corporate minimum tax of 15 percent for multinationals with global turnover exceeding €750 million.
    - Estimated to capture a tax base of $1.47 trillion.
    - Increases global annual corporate income tax revenues by roughly 5.7 percent (about $150 billion) when applying the carve-out (deduction of 8 percent of assets and 10 percent of payroll).
    - Removing the carve-out would increase Pillar 2 revenues to an estimated 9 percent of current global corporate income tax revenues.
    - If low-tax countries remain below the minimum and do not raise rates, static revenue gains are concentrated in advanced economies; if all source countries apply the minimum, source countries capture the revenue gains.
  - Combined effects:
    - Pillar 2 raises global corporate income tax revenues by 5.7 percent through the top-up tax and by an extra 8.1 percent potentially through reduced tax competition (with and without carve-out).
- Personal taxation and transparency:
  - Cross-border remote work estimated at 1¼ percent of the global personal income tax base; rough estimates suggest annual reallocation of about $40 billion of personal income tax base globally from remote work (1¼ percent of the total personal income tax base in the sample).
  - Global undisclosed offshore wealth estimated at $7 trillion (8 percent of global household wealth or 9.3 percent of global GDP), corresponding to roughly $150 billion in unpaid income tax annually under stated assumptions.
  - The Global Forum on Transparency and Exchange of Information for Tax Purposes: “currently with 163 members.”
  - Establish beneficial-ownership registries, build tax administration capacity (data analytics and specialized units), and facilitate timely access to country-by-country reports for low-income countries are recommended.
- Carbon-pricing coordination:
  - A commitment to an international carbon price floor by key emitters—appropriately differentiated and accommodating equivalent measures—would curb emissions sufficiently to deliver on the 2°C objective.
  - Illustrative differentiated carbon-price assumptions and impacts:
    - Equivalent carbon-price assumptions: $75 per ton for advanced economies, $50 per ton for high-income emerging market economies such as China, $25 per ton for low-income emerging market economies such as India.
    - Implementing such an agreement would reduce emissions in 2030 by 35–50 percent below baseline levels for advanced economies and 20–30 percent for emerging market economies (under illustrative assumptions reported).
    - Reinforcing existing pledges with a price floor could cut global CO2 emissions by 29 percent below baseline levels; when all G20 members participate, global emissions decrease by 32 percent.
  - Macroeconomic and fiscal implications:
    - Carbon pricing could mobilize new revenue ranging between 0.7 and 2.9 percent of GDP depending on the CO2 price and CO2 intensity of GDP.
    - Abatement costs under the illustrative regime vary from 0.2 to 1 percent of GDP for most countries; costs highest on average for advanced economies and lowest for low-income countries and many emerging market economies.
    - Domestic environmental cobenefits (for example reduced mortality from local air pollution) can offset a large portion of costs and substantially exceed them in several large emerging market economies.

### Reform agenda, green public financial management (Green PFM), and revenue mobilization
- Reform priorities:
  - Act on climate change, address spending pressures from aging, and promote a more inclusive and sustainable economy.
  - Transition to a more diverse, clean, and renewable energy matrix; avoid short-term measures that entrench long-duration fossil fuel projects.
  - Revenue mobilization: modernize tax and customs administrations, improve efficiency and digitalization, broaden and diversify the tax base, and revisit wasteful tax incentives.
  - Use of special drawing rights (SDRs): countries with strong external positions could voluntarily channel some SDRs to poorer and more vulnerable countries.
  - For urgent and comprehensive debt treatments: make the G20 Common Framework fully operational.
- Green PFM tools and status:
  - Green PFM practices include aligning national and sectoral strategies with mitigation/adaptation commitments, preparing medium-term fiscal frameworks that consider climate policy implications, ex ante climate impact analyses of fiscal measures, tagging and monitoring climate-related expenditure, and publishing ex post reviews.
  - Only 19 countries worldwide have implemented a form of climate budget tagging; 60 percent of OECD countries do not yet implement any form of green PFM (OECD 2021a).
  - The IMF has expanded capacity development: a green PFM framework, a climate change module to the Public Investment Management Assessment framework, and the IMF Climate Macroeconomic Assessment Program.

### Policy recommendations and international cooperation priorities
- Short-term: protect the most vulnerable from high and rising food and energy prices with targeted, temporary measures while allowing market price signals to encourage supply responses.
- Medium-term: anchor policy in sound and credible medium-term fiscal frameworks, reprioritize spending, mobilize revenues, and rebuild buffers where commodity windfalls permit.
- International cooperation priorities:
  - Manage legacies of COVID-19 and prepare for future pandemics.
  - Address immediate needs from soaring food and energy prices and support refugees.
  - Improve sovereign debt resolution mechanisms and make the G20 Common Framework operational.
  - Coordinate on corporate taxation and carbon pricing to mobilize resources and mitigate climate change.
  - Multidonor funding vehicles could coordinate international support for food security; avoid unilateral actions (for example export restrictions) that worsen global food prices.

### Risks, uncertainty, and downside scenarios
- Unusually high uncertainty: a protracted war in Ukraine, further sanctions on Russia, tighter-than-expected global financial conditions, a sharper-than-expected slowdown in China, or new COVID-19 variants could materially worsen fiscal and economic outcomes.
- Tighter global financial conditions would be particularly detrimental for countries with large debt vulnerabilities; historical experience shows slow restoration of primary balances following crises, raising medium-term fiscal challenges.
- Editor’s note: Projections for Ukraine in 2022 and beyond (Tables A9–A15 and A24) are omitted due to an unusually high degree of uncertainty; data in statistical tables are compiled on the basis of information available through April 8, 2022.

*Preface — Fiscal Monitor: Fiscal Policy from Pandemic to War (April 2022), International Monetary Fund*

### Preface viii

### Preface viii

### Projections and Methodology
- Projections are drawn from the same database used for the April 2022 World Economic Outlook and Global Financial Stability Report and are referred to as “IMF staff projections.”
- Fiscal projections refer to the general government, unless otherwise indicated.
- Short-term projections are based on officially announced budgets, adjusted for differences between national authorities and IMF staff regarding macroeconomic assumptions.
- Projections incorporate policy measures judged by IMF staff as likely to be implemented.
- For countries supported by an IMF arrangement, projections are those under the arrangement.
- Where IMF staff has insufficient information to assess authorities’ budget intentions and policy implementation prospects, an unchanged cyclically adjusted primary balance is assumed, unless indicated otherwise.
- Details on group composition and country-specific assumptions are in the Methodological and Statistical Appendix of the April 2022 Fiscal Monitor.

### Macroeconomic and Fiscal Context: Pandemic, Recovery, and War
- Since early 2020, fiscal policy delivered large-scale support to households and firms during the Great Lockdown, preventing a much deeper and prolonged recession.
- Exceptional monetary accommodation by major central banks complemented fiscal actions, jointly preventing deflation in the early pandemic stages.
- Large deficits resulting from pandemic support added to already-elevated global debt levels.
- Unprecedented macroeconomic policy support plus supply disruptions led to demand recovering faster than supply; inflation surprises began to accumulate in 2021.
- The backdrop for fiscal policy shifted abruptly as interest rates are raised to keep inflation in check, constraining fiscal space and focusing attention on how much—and how fast—deficits and debts should be reduced.
- Russia’s invasion of Ukraine has reintroduced major uncertainty and triggered spikes in energy and food prices on top of already elevated levels.

### Debt, Financial Stability, and Vulnerabilities
- When global credit conditions tighten, the most vulnerable countries suffer the biggest squeeze.
- “Some emerging market spreads have reached dangerous territory, and 60 percent of the lowest-income economies are already in or at high risk of debt distress.”
- The Debt Service Suspension Initiative (DSSI) expired at the end of 2021, and the G20 Common Framework for Debt Treatments beyond the DSSI has yet to deliver on its promise.
- Additional efforts are needed for emerging markets and developing economies not eligible for the Common Framework; muddling through will amplify costs and risks to debtors, creditors, and global stability.
- During the pandemic, the rise in sovereign debt in emerging markets was financed to a large extent by domestic banking sectors, deepening sovereign–bank linkages and raising the risk of adverse feedback loops as sovereign assets come under stress.

### Inflation, Interest Rates, and Debt-Service Dynamics
- Treasuries in advanced economies must heed rising inflation after benefiting for two decades from declining debt service costs driven by trends in nominal interest rates and neutral real interest rates.
- While inflation surprises can contribute to lower debt ratios, a regime of permanently high and volatile inflation undermines the attractiveness of sovereign bonds and makes it harder to sustain elevated debt levels.
- As interest rates are raised to keep inflation in check, fiscal space becomes more constrained.

### Policy Guidance for Energy and Food Price Shocks
- Governments should act to protect people from the worst consequences of energy and food price spikes, but chosen policies should be timely, targeted, and temporary, given limited fiscal space and heightened public finance risks.
- A fundamental principle: support people while allowing domestic prices to adjust to spur additional supply and avoid shortages.
- Policy options:
  - Targeted and temporary transfers where possible.
  - Where social safety nets and information systems are less complete, consider smoothing consumption bills or lump-sum utility bill discounts.
  - Ensure access to adequate nutrition for everybody; where needed, pass-through can be gradual (for example for the prices of staple foods and cooking fuels).

### Climate Policy and Tax Coordination
- Chapter 2 discusses global cooperation on tax policy, including income taxes and carbon pricing, as a pathway to a fairer and greener economy.
- Tackling the climate crisis is urgent: the world is “dramatically off-track to limit global warming to 2°C.”
- A commitment to an international carbon price floor by key emitters—appropriately differentiated and accommodating equivalent measures—would curb emissions sufficiently to deliver on such a goal.
- To reconcile managing the present energy crisis with the climate crisis, countries should commit now to:
  - Gradually eliminate fossil fuel subsidies.
  - Increase carbon prices.
- COP-27 in Egypt must deliver effective action, including on finance for development, climate adaptation, and a commitment to international cooperation to deliver on 2030 mitigation targets.
- Policymakers must manage labor-market implications of the green transition (noted as covered by Chapter 3 of the April 2022 World Economic Outlook).

### Institutional Roles, Coordination, and Next Steps
- The IMF will work with creditors and debtors to find effective frameworks for collective action on sovereign debt treatment.
- Global cooperation remains necessary to:
  - Manage legacies of COVID-19 and prepare for future pandemics.
  - Address immediate needs from soaring food and energy prices.
  - Fight climate change.
  - Improve sovereign debt resolution.
  - Promote sustainable development with an urgent emphasis on the elimination of poverty and hunger.

### Key Administrative and Editorial Notes
- The Fiscal Monitor is prepared by the IMF Fiscal Affairs Department under the general guidance of Vitor Gaspar, Director of the department.
- The project was directed by Paolo Mauro, Deputy Director; and Paulo Medas, Division Chief.
- Main authors and contributors for Chapters 1 and 2 and the Methodological and Statistical Appendix are listed in the Preface.
- Inputs and comments were received from multiple IMF departments and external reviewers; projections and policy considerations are those of IMF staff and should not be attributed to Executive Directors or national authorities.
- Corrections and revisions are incorporated into digital editions on the IMF website and IMF eLibrary; substantive changes are listed in the Table of Contents of the online PDF.
- Print and multiple digital editions are available; digital downloads of the report and data sets for charts are available from the IMF website.

*Preface — Fiscal Monitor: Fiscal Policy from Pandemic to War (April 2022), International Monetary Fund*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Chapter 1: Fiscal Policy from Pandemic to War
- Context and shocks
  - Just as uncertainty associated with the COVID-19 pandemic was abating, Russia invaded Ukraine; uncertainty shifted from pandemic to war.
  - Since the war started, more than 4.5 million refugees have fled Ukraine as of April 10.
  - The war is disrupting commodity markets, further fueling inflation, raising the risks of social unrest, and causing costly displacement and loss of human capital.
- Distributional and fiscal effects of the pandemic and ensuing shocks
  - An estimated 70 million more people (relative to the prepandemic trend) experienced extreme poverty in 2021.
  - Household savings rose sharply relative to prepandemic levels—by a combined $3½ trillion in the United States and the European Union during 2020–21.
  - In many developing economies, fiscal support was insufficient to prevent a fall in household income.
- Inflation surprises and public finances
  - Inflation surprises reduced public debt-to-GDP ratios in advanced and emerging market economies (excluding China) by 1.8 and 4.1 percentage points of GDP in 2021.
  - Although inflation surprises can reduce deficits in the short term as nominal revenues increase faster than nominal spending, relief is usually temporary; higher inflation expectations and volatility can raise sovereign borrowing costs.
- Fiscal outlook and debt projections (preserve numeric values exactly)
  - Deficits are falling globally but are expected to remain above prepandemic levels.
  - The average public debt in advanced economies is projected to decline to 113 percent of GDP by 2024.
  - Public debt in emerging markets is projected to continue to rise, mainly driven by China, reaching 72 percent of GDP by 2024.
  - Among low-income developing countries, debt is expected to gradually decline to 48 percent of GDP by 2024.
  - Public debt in commodity (oil) exporters is expected to fall from almost 56 percent of GDP in 2021 to 50 percent of GDP in 2024 due to positive terms-of-trade shocks.
  - Total (public plus nonfinancial private) debt rose by 28 percentage points in 2020 to 256 percent of global GDP.
  - Government debt now accounts for 40 percent of total global debt.
- Policy guidance and trade-offs
  - High uncertainty and marked divergences across countries require tailored and agile fiscal policy responses.
  - Fiscal policy should protect the most vulnerable from high and rising food and energy prices, prioritizing targeted support given rising inflation and interest rates.
  - If economic activity deteriorates significantly, broader fiscal support could be appropriate in countries with fiscal space, but should avoid exacerbating demand-supply imbalances and price pressures.
  - In countries where growth is less exposed to the conflict and central banks are raising rates, fiscal policy should move away from exceptional pandemic support toward normalization.
  - In many emerging markets and low-income developing countries, trade-offs are harsher: higher inflation and tightening global financial conditions call for prudence, while support is needed for those hardest hit.
  - Sound and credible medium-term fiscal frameworks help manage market expectations and contain sovereign borrowing costs.
  - Mounting public spending pressures (for example, safety nets and defense) require reprioritizing spending and mobilizing revenues.
- Response to high food and energy prices
  - Many countries have limited domestic price rises via tax cuts or subsidies, or provided generalized subsidies or transfers; such measures can have large fiscal costs and undesirable consequences (exacerbate global imbalances, put upward pressure on international prices, and lead to shortages).
  - A better solution is to provide targeted, temporary, and direct support to vulnerable households while allowing domestic prices to adjust, thereby containing fiscal pressures and preserving incentives for private sector supply.
- Climate and energy policy considerations
  - Measures addressing immediate food and energy needs should not detract from action to tackle climate change.
  - Investment in health, food, and energy security from cleaner sources is urgent to ensure resilience.
  - Moving toward a more diverse, clean, and renewable energy matrix will ensure energy security and facilitate the green transition.
  - Short-term responses to high energy prices should avoid investing in long-duration and capital-intensive fossil fuel projects.
- International cooperation
  - Global cooperation is critical for addressing pandemic consequences, energy and food disruptions, refugee support, future pandemic preparedness, and climate change mitigation.
  - Unilateral actions (for example, restricting food exports) could worsen the food crisis.
  - Cooperation is crucial where high debts become unsustainable; where reprofiling or restructuring is called for, a multilateral cooperative approach that goes beyond SDR channeling is essential.

### Chapter 2: Coordinating Taxation across Borders
- Rationale for international coordination
  - Mobilizing tax revenues, enforcing tax rules, and mitigating climate change are common global concerns; insufficient coordination leads to inefficiently low taxes and suboptimal climate action.
  - Effective coordination in corporate and income taxes requires global participation; a small number of key emitting countries could meaningfully curb global warming through coordinated carbon pricing.
- Corporate tax coordination and the two-pillar agreement
  - The October 2021 two-pillar agreement under the Inclusive Framework on Base Erosion and Profit Shifting—to date agreed to by 137 jurisdictions—will significantly improve taxation of multinationals when implemented.
  - Pillar 1: Allocating a portion of the tax base to market countries (allowing them to tax even without a physical presence) is more efficient than unilateral digital-services taxes; the reallocation covers only 2 percent of global profits of multinational corporations but has a global revenue impact broadly comparable with revenues from existing unilateral digital-services taxes.
  - Pillar 2: A corporate minimum tax of 15 percent reduces incentives to shift profits across countries and puts a floor on tax competition—giving countries room to raise corporate income taxes and revisit wasteful tax incentives.
  - The minimum tax is estimated to raise global corporate income tax revenues by 5.7 percent through the top-up tax and potentially by an additional 8.1 percent through reduced tax competition.
  - Further actions to incorporate low-income countries include agreeing on tax simplification measures, strengthening withholding taxes on specific cross-border payments, and facilitating timely access to country-by-country information on multinationals.
- Personal taxation and exchange of information
  - International cooperation on information sharing can curtail offshore tax evasion; building on progress through the Global Forum on Transparency and Exchange of Information for Tax Purposes, three reform directions are highlighted:
    - Establish beneficial ownership registries, or comparably efficient alternatives, so tax authorities may access reliable and up-to-date beneficial ownership information.
    - Build capacity in data analytics and specialized units in tax administrations, especially for low-income countries, to support tax compliance.
    - As cooperation improves, adjust tax policy—especially regarding those at the top of the income distribution—in countries where implementation capacity constrains tax policy choices.
  - Cross-border remote work is expanding the mobility of labor income: currently estimated at 1¼ percent of the global personal income tax base; personal tax coordination will gain importance.
- Carbon-pricing coordination and mitigation impact
  - Urgent action and coordination are required to curtail emissions and complement the Paris Agreement and COP26 progress.
  - Reinforcing the Paris Agreement with an international carbon price floor for key emitting countries (accommodating alternative approaches through calculation of equivalent prices) can limit global warming to 2°C or less, while accommodating differentiated responsibilities by income level.
  - Implementing such an agreement would reduce emissions in 2030 by 35–50 percent below baseline levels for advanced economies and 20–30 percent for emerging market economies, assuming measures equivalent to a carbon price of:
    - $75 per ton for advanced economies,
    - $50 per ton for high-income emerging market economies such as China,
    - $25 per ton for low-income emerging market economies such as India.
  - Nonpricing policies such as regulations can be accommodated through a consistent cross-country method to map agreed emission reductions into an equivalent carbon price as a common metric.
  - International coordination is essential to overcome the limits of unilateral action.

### Introduction and Recent Fiscal Developments
- Macro-fiscal context
  - Fiscal policy is operating under lingering pandemic effects, the war in Ukraine, and elevated inflation; central banks have shifted from lower-bound constraints to raising interest rates in response to inflation.
  - Pandemic-era fiscal support and recession produced the largest one-year debt surge since World War II.
- Financing divide and vulnerabilities
  - The pandemic heightened the great financing divide among countries: leverage rose in advanced economies supported by low interest rates and sovereign debt purchases, while many low-income developing countries faced limited access to funding.
  - As central banks in the largest advanced economies increase interest rates, sovereign bond spreads will likely widen, worsening debt vulnerabilities; the war in Ukraine has heightened this divide, with borrowing costs rising significantly for the most affected emerging markets and low-income developing countries.
- Recent fiscal developments (commodity and food exposures)
  - Russia accounts for about 45 percent of the European Union’s total gas imports and 10 percent of global oil exports.
  - Russia and Ukraine account for one-quarter of global wheat, one-seventh of corn, and three-quarters of sunflower oils exports.
  - Since the war started, supply disruptions have steepened rising trends in energy and food prices; the broad-based food price index of the Food and Agriculture Organization reached its all-time high since the index was introduced.

*Italic line: Executive Summary (text - EXECUTIVE SUMMARY), text - EXECUTIVE SUMMARY, https://www.imf.org/-/media/files/publications/fiscal-monitor/2022/april/english/text.pdf*

### 1990. Commodity prices are also more volatile.

### 1990. Commodity prices are also more volatile.

### Fertilizer shortages and food price amplification
- Russia and Belarus account for one-fifth of global fertilizer exports, especially potassic fertilizers (one-third of global trade) and nitrogenous fertilizers.
- Potash production relies on mining; nitrogen-based fertilizer production requires natural gas; scaling up production elsewhere is not straightforward.
- Fertilizers’ prices had already increased by about 80 percent over the last 12 months.
- Additional fertilizer supply tensions could impact future harvests in large economies (Brazil, India, United States) and most low-income developing countries, especially in Africa, which rely almost exclusively on imported fertilizers.

### Fiscal impact of rising commodity prices
- Fiscal effects vary significantly across countries as economic activity and terms of trade adjust.
- Importers of energy will feel the worse economic impact and fall in budgetary revenues; large energy exporters will benefit the most.
- Fiscal effects on governments’ budgets also depend on policy reactions to rising prices, notably energy subsidies measured as the change in net taxes.
- Net taxes are positive when domestic retail prices are greater than supply costs and negative when less than supply costs.
- Energy subsidies could pose significant fiscal costs—measured as the change in net taxes.

### Pass-through of global energy prices and domestic policy implications
- The pass-through of global energy prices to domestic prices for gasoline and diesel has been the highest in advanced economies and the lowest in low-income developing countries (including those in the Middle East and Northern Africa and sub-Saharan Africa), given reliance on ad hoc fuel pricing mechanisms.
- If international oil prices and domestic retail prices as of the end of February 2022 persist for the remainder of the year, low-income developing countries would face another round of substantial fiscal effects.
- Rising food prices, refugee-related costs, and greater defense spending (for example, Germany) will add to fiscal pressures.
- During the 2008 global food price crisis:
  - More than 80 countries reduced food taxes between 2006 and 2008 with comparable food price increases.
  - The fiscal cost of these measures reached more than 0.5 percent of GDP in countries for which data are available and up to 1.1 percent of GDP in some cases.
- For the current crisis, countries have provided different types of support, including transfers to households.

### Fiscal deficits, public debt, and medium-term outlook
- Fiscal deficits and debts are evolving with large differences across country groups, reflecting divergent economic recoveries.
- After a large increase at the onset of the pandemic, deficits declined in 2021 as economies recovered and countries started to withdraw exceptional support.
- Deficits are expected to decline further in advanced economies, mirroring the pace of the recovery; in emerging markets and low-income developing countries, on average, deficits are projected to decline more gradually over the medium term.
- Scarring from the pandemic, more expensive food and energy imports, risks of social unrest, and tighter financing constraints in the developing world will make meeting the United Nations Sustainable Development Goals even more challenging.
- Global public debt is expected to stabilize at around 94 percent of GDP during 2022–24, well above prepandemic levels, raising concerns about debt vulnerabilities and financial stability and weighing on growth prospects, especially if interest rates rise faster than expected.
- High public debt, coupled with record leverage in nonfinancial corporate balance sheets, may constrain governments’ ability to cope with new shocks and reduce growth prospects.
- History shows that half a decade after the global financial crisis began, many advanced economies and emerging markets had not restored precrisis primary balances.

### Uncertainty and downside risks
- The fiscal outlook is subject to unusually high uncertainty.
- A protracted and intensified war in Ukraine would disrupt commodity markets for longer, further pressuring inflation, undermining economic growth, and exacerbating fiscal deficits; it would also increase the risk of private sector bankruptcies and financial sector distress.
- Tighter-than-expected global financial conditions would be particularly detrimental for countries with large debt vulnerabilities.
- The evolution of the pandemic remains a source of uncertainty amid uneven vaccination progress across countries.

### Policy shifts and country examples
- Advanced economies are shifting policies from COVID-19 support to promoting structural transformation:
  - On average, advanced economies are projected to increase annual public investment by 0.5 percentage points of GDP in the medium term relative to prepandemic forecasts.
  - The United States passed an infrastructure bill totaling around 2 percent of GDP in new funding spread over the medium term.
  - Japan announced a new fiscal package (5 percent of GDP) for 2022–23 including extended pandemic relief, broader social spending, and infrastructure investment.
  - Public investment in the European Union is projected to be 0.5 percent of GDP higher than prepandemic forecasts in 2022 as countries implement national Recovery and Resilience Plans partly financed by the common EU budget.
  - The United Kingdom’s Plan for Growth program includes a pledge to raise public sector net investment to an average 2.7 percent of GDP until 2024–25.
- After jumping by 19 percent of GDP in 2020, public debt in advanced economies is expected to decline slightly over the medium term.
- Debt-to-GDP ratios in 2021 stayed on average about 6 percentage points below forecasts reported in the October 2020 Fiscal Monitor due to nominal GDP growth above expectations and lower-than-expected deficits.
- Next Generation EU support financed by the common EU budget will provide fiscal space to member countries severely affected by the pandemic.

*Italic: IMF staff estimates and analysis as presented in Chapter 1, Fiscal Monitor: Fiscal Policy from Pandemic to War (April 2022).*

### CHAPTER 1 FISCAL POLICY FROM PANDEMIC TO WAR

### CHAPTER 1 FISCAL POLICY FROM PANDEMIC TO WAR

### Global and country debt levels and projections
- Table highlights (selected observations from Table 1.2):
  - World gross debt: 82.0 (2017), 95.5 (2027).
  - Advanced Economies gross debt: 103.2 (2017), 112.7 (2027).
  - Japan gross debt: 231.4 (2017), 261.8 (2027).
  - United States gross debt: 106.2 (2017), 127.4 (2027).
  - Emerging Market Economies gross debt: 50.5 (2017), 77.2 (2027).
  - Low-Income Developing Countries gross debt: 42.1 (2017), 45.9 (2027).
  - World net debt: 67.3 (2017), 78.2 (2027).
  - Advanced Economies net debt: 74.5 (2017), 86.7 (2027).
  - United States net debt: 80.3 (2017), 105.6 (2027).
  - Emerging Market Economies net debt: 36.0 (2017), 44.6 (2027).

- Notes on methodology:
  - Country averages are weighted by nominal GDP converted to US dollars (adjusted by purchasing power parity only for world output).
  - Projections are based on IMF staff assessments of current policies.
  - For cross-economy comparability, gross and net debt levels reported by national statistical agencies for certain economies are adjusted to exclude unfunded pension liabilities.
  - Net debt for advanced economies includes the grants portion of the Next Generation EU package disbursed in 2021 (€73 billion, 0.5 percent of European Union GDP).

### Emerging markets: near-term outlook and risks
- Fiscal balances and debt dynamics:
  - Overall deficits in emerging markets (excluding China) are expected to decline, on average, by less than 1 percent of GDP during 2022.
  - Fiscal outlook is particularly uncertain due to the war and its spillovers; deficits worsen sharply in Belarus, Russia, and Ukraine.
  - Commodity exporters: primary balance expected to improve from a deficit of 2.3 percent of GDP in 2021 to a surplus of almost 2 percent of GDP in 2022.
  - Result for commodity exporters: debt projected to decline from 50 percent of GDP in 2021 to 43 percent of GDP in 2022.
- Medium-term projections:
  - Beyond 2022, primary balances in emerging markets (excluding China) are expected to improve by 0.4 percent of GDP, from 1.2 percent of GDP in 2022 to 0.8 percent of GDP by 2024.
  - Average debt-to-GDP ratio for these emerging markets would broadly stabilize around 59 percent of GDP, above pre-pandemic medium-term projection of 52½ percent of GDP.
  - China: fiscal deficits projected to hover around 7 percent of GDP and public debt to rise from 73 percent of GDP in 2021 to around 86 percent of GDP by 2024 (compared with 57 percent of GDP the year prior to the pandemic).
  - South Africa: debt-to-GDP ratio projected to surpass 75 percent in the next two years.
- Financing needs and interest burden:
  - Average gross financing needs for emerging markets (excluding China) expected to decline by about 0.5 percent of GDP in 2022 compared to 2021.
  - Over the medium term, average gross interest bill projected to increase from about 3 to 3.5 percent of GDP.

### Low-Income Developing Countries (LIDCs)
- Fiscal balances and revenues:
  - Average fiscal deficit remained broadly stable in 2021 at about 5 percent of GDP.
  - Revenues remain well below pre-pandemic projections: revenue-to-GDP ratio is 1½ percentage points lower than projected before the pandemic.
  - Severe output loss: about 6 percentage points of GDP.
  - In 2022, average overall fiscal deficit in LIDCs expected to rise from 4.9 percent of GDP in 2021 to 5.1 percent of GDP in 2022.
  - Medium term: average deficit projected to narrow to 4.2 percent of GDP in 2024 (still above pre-pandemic average).
- Expenditures and debt service:
  - Expenditures in LIDCs projected to fall to 19 percent of GDP by 2024, with a gradual scaling down of current spending.
  - Average gross debt in LIDCs remained around 50 percent of GDP in 2021 and is projected to decline moderately to 48 percent of GDP by 2024.
  - Median debt service to tax ratio expected to remain above the pre-pandemic level and exceed 40 percent in several highly indebted countries (Ghana, Myanmar, Nigeria).
  - Debt distress: about 60 percent of LIDCs are now at high risk or already in debt distress—compared with slightly less than 30 percent in 2015.

### Government support, poverty, and household savings during the pandemic
- Government support and poverty outcomes:
  - Government programs (employment subsidies, tax relief, cash transfers) varied greatly across countries and shaped household income outcomes.
  - United States: Supplemental Poverty Measure rate was 9.1 percent of the population in 2020, 2.6 percentage points lower than in 2019.
  - Brazil: emergency social assistance program drove a sharp but temporary decline in poverty in 2020; estimates suggest number of poor individuals decreased from 23 million in 2019 to 9.8 million in September 2020, then rose to around 27.7 million in early 2021 as exceptional support was reduced.
  - In countries with large informal sectors and low social protection, fiscal support had limited effect cushioning household income declines.
- Household savings and consumption:
  - Despite large government transfers, private consumption declined and household savings rose sharply.
  - Excess savings (above pre-pandemic trends) estimated at approximately $2.5 trillion in the United States and $1 trillion in the European Union during 2020–21.
  - Distributional notes: Low-income households in the United States experienced the largest percentage gains in net savings in 2020 while also increasing consumption.
  - Policy challenge: excess savings could buffer higher inflation and lower growth but, if spent quickly, could add to inflationary pressures.
  - Time-bound poverty support programs risk a rise in poverty when such support ends, especially given uncertainty and rising energy and food prices.

### Inflation, fiscal effects, and monetary policy implications
- Short-term effects of inflation surprises:
  - Surprise inflation in 2021 contributed to an average decline in global debt projections of around 2 percent of GDP relative to 2020.
  - Surprise inflation shaved about 1.8 percentage points off 2021 public debt-to-GDP ratios in advanced economies and 4.1 percentage points off in emerging markets excluding China.
  - A surprise of 1 percentage point in the annual inflation rate could increase nominal revenues by 0.8 percent in emerging markets and 0.3 percent in advanced economies.
  - Nominal spending reacts less to moderate inflation surprises because much spending is precommitted in nominal terms.
- Longer-term considerations:
  - The rise in inflation is likely to be followed by rising interest rates and higher debt burdens.
  - Preserving the special status of government debt as the safe asset requires maintaining price stability in the longer run.

*Source: IMF staff estimates and projections (FISCAL MONITOR: FISCAL POLICY FROM PANDEMIC TO WAR, April 2022).*

### 1. United States2. European Union3. Mexico

### 1. United States2. European Union3. Mexico

### Sovereign borrowing costs and debt profile
- Fixed-rate long-term domestic currency denominated debt accounts for 60 percent or more of the government debt in a sample of advanced economies.
- Emerging markets predominantly have foreign-currency-denominated, short-term, floating rate, or inflation-indexed debt.
- Quantitative easing can convert portions of fixed-rate long-term debt into larger short-term public sector liabilities (represented as bars with diagonal lines), increasing public sector vulnerability to interest rate rises.

### Pass-through of policy rates to sovereign interest rates
- For advanced economies: for each increase of 100 basis points in the policy rate, the effective interest rate for the government rises by about 30 basis points one year later.
- For emerging markets: the median pass-through is smaller than for advanced economies, with wide dispersion; some countries have a pass-through above one (borrowing costs could increase more than proportionally to rises in policy rates).
- Factors affecting heterogeneity: debt profile (maturity, currency denomination, instrument types), monetary policy framework, sensitivity to global financial conditions, sovereign risk premium, exchange rate movements.

### Inflation volatility and sovereign yields
- An increase of one standard deviation in inflation volatility can increase long-term government bond yields by 0.5 percentage points in 3 years.
- The yield increase from higher inflation volatility tends to be higher when public debt is higher.
- More volatile inflation can depress investment and growth, adversely affecting fiscal space.
- Historical episodes where moderately high inflation reduced public debt relied on conditions (for example, financial repression) that are unlikely to recur; current shorter maturities, greater inflation indexation, and alternative investment opportunities increase the chance that higher inflation leads to higher sovereign interest rates.

### Short-term fiscal responses to inflation surprises
- Short-term responses of nominal revenue growth, nominal spending growth, and overall balance over GDP vary by country group; regressions control for growth of private demand and include country and year fixed effects (sample excludes oil exporters, financial centers, and outliers).

### Managing the effects of high energy and food prices
Findings:
- Rising energy and food prices put pressure on household budgets and can lead to food crises in some countries.
- Many governments have announced measures (tax cuts, subsidies, generalized transfers) to limit domestic price rises; such actions can have undesirable consequences and large fiscal costs.
- Generalized price subsidies can exacerbate global demand-supply imbalances, raise international prices, and hurt low-income importing countries with less fiscal space.
- Untargeted measures (for example, general fuel subsidies) are costly and tend to disproportionately benefit higher income households.

Policy recommendations:
- Targeted and direct support to vulnerable households, while allowing domestic prices to follow international prices.
  - Rationale: avoids costly generalized subsidies, preserves market incentives, contains fiscal costs.
- Gradual pass-through of international prices to retail prices for countries with existing energy or food subsidies, sequencing pass-through by product (for example, gasoline versus LPG) depending on usage by income groups.
  - Pace: relatively fast to avoid distortions and large fiscal costs, with gradualism adjusted for domestic-international price gaps, fiscal space, and mitigation capacity.
- Build capacity to enhance social safety nets against future shocks; if food provision is at risk and cash transfers are not viable, consider food distribution.
- Use targeted and temporary cash transfers in countries with strong social safety nets; prefer unconditional cash transfers or lump-sum conditioned benefits over proportional benefits to reduce distortions and increase progressivity.
- Expand effective programs and leverage digital methods in countries with weak social safety nets; consider targeting by geographic region or age, expand school feeding programs, reduce education and health fees, or review public transport subsidies.
- Market measures: release food reserves to offset short-term supply shortages; reassess incentives that divert crops to biofuel production (for example, corn for biofuel versus food supply).

International cooperation:
- Multidonor funding vehicles could coordinate international support for food security, drawing on precedents such as the World Bank’s Global Food Crisis Response Program and the G20 Global Agriculture and Food Security Program.
- Countries should avoid unilateral actions that increase global food prices, such as export restrictions—especially for upstream staple foods or when the restricting economy holds a sizable global market share—as these actions can be collectively counterproductive and harmful to global food security.

Energy transition considerations:
- Large increases in fossil fuel prices underscore the importance of transitioning to clean and renewable energy sources.
- Short-term energy needs may require all energy types, but urgent responses should not entrench longer-term fossil fuel use or detract from investment in renewable energy and energy efficiency.

### Fiscal strategies and policy conclusions
Findings and guidance:
- Governments face difficult choices amid sharp uncertainty from the war in Ukraine and volatile commodity prices; focus should be on urgent needs, including ensuring access to food for the most vulnerable to avoid social unrest.
- The rise in spending pressures calls for commensurate actions to mobilize domestic revenues.
- Fiscal policy must operate amid slowing recovery, rising interest rates, and increasing debt vulnerabilities; strategies should ensure medium-term sustainability, be anchored on credible fiscal frameworks, and include robust contingency plans to reassure markets and limit borrowing cost increases.

Country-differentiated advice:
- Economies hardest hit by the war in Ukraine and sanctions on Russia: respond to humanitarian crises (including refugee support) and disruptions in energy and food supply; prioritize targeted support given rising inflation and interest rates, but consider broader temporary support where economic activity deteriorates significantly and fiscal space exists.
- Economies with stronger growth and elevated inflation: shift fiscal policy from exceptional pandemic support to normalization to reduce demand pressures and help central banks contain inflation.
- Emerging markets and low-income developing countries: face difficult trade-offs; higher inflation and tightening global financial conditions call for greater fiscal prudence, but support is needed where commodity price shocks and weak recoveries hit hardest. In tight financing or high debt distress situations, prioritize spending and raise revenues while considering distributional effects and the Sustainable Development Goals agenda.
- Commodity exporters benefiting from higher prices should rebuild buffers given inflationary pressures and high commodity price uncertainty.

Global priorities:
- Global initiatives and international cooperation are needed to address energy and food disruptions, future pandemics, health crises, and the climate agenda (including cooperation on carbon pricing).
- Low-income developing countries need international support to manage pressures from high energy and food prices.
- International cooperation is needed to support refugees; as of April 3, more than 4.2 million individuals have fled Ukraine since the start of the war, adding to previous refugee flows. Refugee responses require whole-of-government approaches including health care and social support.

*International Monetary Fund | April 2022*

### CHAPTER 1 FISCAL POLICY FROM PANDEMIC TO WAR

### CHAPTER 1 FISCAL POLICY FROM PANDEMIC TO WAR

### The Reform Agenda: Priorities and Actions
- Governments must act now on reforms that tackle climate change, address spending pressures from aging, and promote a more inclusive and sustainable economy.
- Transition to a more diverse, clean, and renewable energy matrix is crucial to shield economies from volatile fossil fuel prices.
- Revenue mobilization needed to finance increased spending on social protection and essential public services:
  - Modernize tax and customs administrations, improve efficiency, and increase digitalization to strengthen compliance, facilitate trade, and secure additional revenue.
  - Broaden and diversify the tax base to increase revenues and ensure fairer competition.
  - Enhance international cooperation to support revenue mobilization (see Chapter 2 referenced in text).
- Use of special drawing rights (SDRs) by countries with strong external positions:
  - Countries with strong external positions could voluntarily channel some of their special drawing rights to poorer and more vulnerable countries (notes 13 and 14 describe potential channels and recent SDR/budget support uses).
- For countries needing urgent and comprehensive debt treatments:
  - Make the G20 Common Framework fully operational.

### Social Protection, Poverty, and the Pandemic
- Global extreme poverty (people living on $1.90 a day or less):
  - Expected to be about 70 million people higher in 2021 relative to prepandemic projections (based on growth in per capita GDP and assuming inequality remained broadly stable).
  - If inequality rises, poverty will be higher; an increase of 1 percent in the Gini coefficient of income inequality would add 20 million more people in extreme poverty in 2021.
- Well-targeted government support can limit poverty increases; caution urged in withdrawing exceptional support given higher inflation.
- Country examples and program impacts:
  - Brazil: the emergency assistance program (Auxilio Emergencial) amounted to 4 percent of GDP in 2020 and temporarily more than offset the large decline in labor incomes when benefit levels and coverage were at their highest; as coverage and benefits declined, poverty rose again.
  - United States: pandemic-related measures reduced poverty by half to about 9 percent by March 2021; with the expiration of the child tax credit in December 2021, poverty is estimated to have risen from 12½ percent to about 15 percent in January 2022.
  - Mexico: modest increase in support in 2020 of 0.7 percent of GDP compared with other emerging market economies.
  - Mexico’s extreme poverty rose by about 2 million between 2018 and 2020, though social transfers prevented larger increases.
- Cross-country evidence on social safety nets:
  - High coverage and adequacy of social assistance programs matter for poverty reduction (Figure 1.1.1; Online Annex 1.2).
  - Examples: South Sudan’s social protection has a negligible poverty effect due to very low coverage and adequacy; Chad has high adequacy but low coverage and performs slightly better; Moldova has higher poverty effect with both high coverage and adequacy.
  - Higher informality is associated with a reduction in the impact of social protection and labor programs in poverty alleviation.
- Pandemic-era adjustments to social protection measures (onset of pandemic to February 2022):
  - Vertical expansions (increase in benefits): 15 percent of measures.
  - Horizontal expansions (increase in coverage): 75 percent of measures.
  - Both vertical and horizontal expansions: 4 percent of measures.

### Measures in Response to High Energy and Food Prices
- Survey of 94 countries (survey done in March 2022): more than two-thirds of advanced economies in the survey (total 29 countries) announced at least one spending measure since the beginning of the year; emerging and developing economies announced fewer new policy measures.
- Many countries limited pass-through of higher world energy and food prices to domestic consumers; about 60 percent of reported countries (38 countries) have existing energy subsidies and 30 percent have existing food subsidies (19 countries); almost one-quarter have both energy and food subsidies.
- Energy-related measures and impacts:
  - Several oil exporters could see significant rises in fuel subsidies (Algeria, Ecuador, Kuwait). Nigeria announced extending fuel subsidies for another 18 months.
  - Oil-importing countries with fuel subsidies (Burkina Faso, Cameroon) had been adjusting prices on an ad hoc basis but not since the beginning of the year (as of March 21, 2022).
  - Other countries increased fuel prices by different degrees recently (from a total of 6 to 40 percent) (Sierra Leone, Sri Lanka, Tunisia).
  - Electricity subsidies expected to rise where generation is fuel-based and tariffs are not adjusted (Djibouti, Guinea-Bissau, Iraq, Libya, Sri Lanka, Tunisia).
- Food-related measures:
  - Consumer price subsidies in some countries (Egypt, Gabon, India, Indonesia, Iraq, Morocco, Sri Lanka).
  - Input subsidies for farmers (fertilizers and seeds) in India, Malawi, The Gambia; vouchers and ration cards in Egypt, Iraq; in-kind distribution in Djibouti, India.
  - Subsidies mainly on staple foods such as wheat products (Burkina Faso, Egypt, Gabon, Iran, Jordan, Morocco).
- New fiscal measures announced:
  - Tax measures: reduced value-added tax rates for certain food items (Poland, Turkey) and energy (Belgium, Italy, Turkey); temporary exemption of federal taxes and freeze of state taxes on fuels (Brazil); temporary reduction or exemption from excise taxes on energy products (France, Korea, New Zealand, Serbia, Thailand).
  - Temporary reduction or suspension of import duties on food (Brazil, Iraq, Turkey) and on containers (Costa Rica).
  - Spending measures: targeted cash transfers to vulnerable households (Denmark, Germany, Haiti, Latvia, Norway, Philippines, Sweden, United Kingdom); some transfers accompanied by price freezes (Dominican Republic, France).
  - Producer subsidies and support: increased transfers to energy state-owned enterprises (Nepal); support to oil importers and wholesalers (Japan, Kosovo); agricultural sector support (China, Turkey); taxi subsidies (Brazil, Japan, Morocco).
  - Loans and eased loan conditions for energy and agricultural firms (Dominican Republic, Germany, Serbia; Japan eased loan conditions for affected firms).
- Tensions and trade-offs:
  - Many measures create tension between near-term affordability and the green transition (for example, reducing consumption taxes on energy products or boosting coal production).
  - Some measures could encourage carbon-intensive production and consumption (boosting coal production in China; sustaining household consumption of coal briquettes through price subsidies in Mongolia).
  - Other measures support green transition incentives (additional funding for climate bonus for environmentally friendly vehicles in Sweden; initiatives toward energy efficiency in Norway, Luxembourg).
- Trade measures:
  - Temporary export bans of staple foods announced since January 2022 (Cameroon, Egypt, Moldova, Serbia, Turkey).
  - China relaxed import restrictions on Russian wheat imports.

- Table 1.2.1 (survey counts of countries that announced at least one new measure since the beginning of 2022; number of countries covered by the survey by group):
  - Spending measures: Advanced Economies 20; Emerging Markets 18; Low-Income Developing Countries 33; Oil Importers 9; Oil Exporters 21; Large Importers of Wheat from Russia/Ukraine 4; Wheat Exporters 3.
  - of which are cash transfer: Advanced Economies 6; Emerging Markets 4; Low-Income Developing Countries 11; Oil Importers 10; Oil Exporters 5; Large Importers of Wheat from Russia/Ukraine 2; Wheat Exporters 0.
  - Tax measures: Advanced Economies 15; Emerging Markets 17; Low-Income Developing Countries 23; Oil Importers 13; Oil Exporters 11; Large Importers of Wheat from Russia/Ukraine 1; Wheat Exporters 3.
  - Below the line: Advanced Economies 2; Emerging Markets 5; Low-Income Developing Countries 0; Oil Importers 7; Oil Exporters 0; Large Importers of Wheat from Russia/Ukraine 2; Wheat Exporters 0.
  - Other measures (trade bans, and so on): Advanced Economies 0; Emerging Markets 5; Low-Income Developing Countries 0; Oil Importers 5; Oil Exporters 0; Large Importers of Wheat from Russia/Ukraine 3; Wheat Exporters 0.
  - Number of countries covered by the survey: Advanced Economies 29; Emerging Markets 46; Low-Income Developing Countries 19; Oil Importers 7; Oil Exporters 16; Large Importers of Wheat from Russia/Ukraine 4; Wheat Exporters 15.
  - Note: Definitions for "large importer of wheat from Russia/Ukraine" and "wheat exporter" use COMTRADE bilateral trade statistics as described in table notes.

### Toward Green Public Financial Management (Green PFM)
- Forceful fiscal actions are essential for transition to a greener and climate-resilient economy; governments need a wide set of tools: carbon pricing, regulations, promotion of renewables, and public investment in clean and resilient infrastructure.
- Integration of climate perspective into public financial management (green PFM) is a key enabler of a greener recovery; green PFM practices include:
  - Requiring that national and sectoral development strategies align with governments’ commitments on mitigation and adaptation to climate change.
  - Preparing a medium-term fiscal framework that considers revenue and spending implications of climate policies.
  - Setting requirements for systematic analysis of the climate impact of new fiscal measures before adoption.
  - Identifying and monitoring climate change-related expenditure items in the budget.
  - Publishing regular ex post reviews of climate outcomes of budget policies.
- Implementation status and examples:
  - Early adopters included low-income developing economies in South Asia (Bangladesh, Nepal) which started green budgeting in the late 2000s with UN support, yielding greater awareness and measurable increases in climate-relevant budget items.
  - France’s “green budget” (launched in 2019) requires ex-ante assessment of environmental impact of all expenditures and implements a scoring system for environmental impact.
  - Momentum on the international agenda via the Coalition of Finance Ministers for Climate Action and the Paris Collaborative on Green Budgeting (OECD).
  - Nevertheless, 60 percent of OECD countries do not yet implement any form of green PFM (OECD 2021a), and only 19 countries worldwide have implemented a form of climate budget tagging (World Bank 2021a).
- Country-specific reform strategies and capacity development are needed:
  - Green PFM reforms require strong political backing, stewardship by ministries of finance, and coordination across levels of government.
  - Governments should set strategic priorities consistent with legal frameworks, capacity, and reform agendas.
  - The IMF has expanded its capacity development toolkit with a green PFM framework (Gonguet and others 2021), introduced a climate change module to the IMF’s Public Investment Management Assessment framework (IMF 2021b), and the IMF Climate Macroeconomic Assessment Program helps countries examine macro-fiscal implications of climate change and climate policies.

*International Monetary Fund | April 2022 — CHAPTER 1, "FISCAL POLICY FROM PANDEMIC TO WAR" (text).*

### References

### References

### Need for international coordination on tax matters
- National governments share challenges in securing revenues, addressing inequalities, and curbing greenhouse gas emissions; these cross-border spillovers necessitate international coordination.
- The most pressing areas for coordination are the taxation of multinational enterprises (multinationals) and individuals, as well as carbon pricing.
- Recent achievements toward international tax coordination cited:
  - Agreement in October 2021 under the Organisation for Economic Co-operation and Development (OECD)/Group of Twenty (G20) Inclusive Framework to reform the taxation of multinationals (OECD 2021d).
  - International agreements to exchange information led by the Global Forum.
  - Countries’ pledges under the Paris Agreement and the UN Climate Change Conference at Glasgow (COP26) to reduce emissions.
- However, the text states: “much more should be done.”

### Drivers increasing need for coordination
- Globalization and digitalization:
  - Have intensified the mobility of the income tax base (profits and personal income) and factors of production (capital and, increasingly, people).
  - Global firms can generate large profits without physical (taxable) presence, creating tax implications that can adversely affect efficiency, distribution, and international economic and trade relations without coordination.
- Salience of aggressive tax avoidance and tax evasion:
  - Leaks of documents and systematic evidence of weak tax compliance by rich individuals have raised demands for fairer societies.
  - Virtual asset transfers with near anonymity increase enforcement challenges for tax administrations, especially in developing countries.
- Climate change:
  - Carbon taxation or other carbon-pricing or regulatory policies can make a difference only if adopted by enough large emitters; without international coordination, unilateral approaches entail international elements.

### Framing of the chapter and contributors
- Chapter prepared under Paolo Mauro (Deputy Director) and Paulo Medas (Division Chief) by Fiscal Affairs Department (FAD) staff with contributions from the Legal Department (LEG).
- Lead author: Shafik Hebous (FAD), with numerous named contributors and research assistance by Julieta Raquel Ladronis (FAD).

### Coordination challenges and economic mechanics
- Uncoordinated tax interactions among independent jurisdictions often lead to unsatisfactory outcomes (illustrative example: lowering a country’s tax on capital can attract tax bases from other countries and reduce their revenues).
- “Race to the bottom” can produce inefficiently low taxation and insufficient public investments and social expenditures (Keen and Konrad 2013); reflected in downward trends of corporate and top personal income tax rates (Figure references).
- Coordination can improve global outcomes but may disadvantage some countries; assessments should compare coordination options with status quo and counterfactual futures, with and without coordination.
- Countries’ interests diverge by characteristics such as economy size and population:
  - Cost of lowering tax rate is generally higher for larger economies because of a larger domestic, relatively immobile, tax base.
  - Small countries tend to have lower taxes (Figure 2.1).
  - Small, low-tax countries have attracted high shares of international investment, corporate profits, and global wealth stock.
    - Cited estimates: “11–36 percent of multinational profits in small low-tax jurisdictions” and “8 percent of worldwide financial household wealth.”
- Small low-tax countries still incur costs from tax competition, including unilateral countermeasures and reputational risks.

### Carbon-pricing coordination parallels
- Uncoordinated attempts to discourage greenhouse gas emissions face national hurdles (competitiveness concerns, carbon leakage, free-riding).
- A handful of large economic regions account for the majority of global emissions; coordinated mitigation among key large emitters could generate significant progress initially.
  - Cited figure: “China, the European Union, India, and the United States together are responsible for 64 percent of global emissions (Parry, Black, and Roaf 2021).”

### Legal modality of coordination
- Coordination can take the form of “hard law” (binding legal obligations, e.g., treaty) or “soft law” (political commitments, e.g., international standards).
- A soft-law approach offers more flexibility for domestic implementation and can be coupled with monitoring mechanisms such as peer review.
- The Paris Agreement is described as combining both hard law (mandatory transparency) and soft law (on enforcement).

### Corporate income tax coordination (summary extract)
- At a Glance (as stated in the text):
  - “The historic October 2021 Inclusive Framework agreement is a watershed moment in international corporate tax coordination, demonstrating that countries can jointly make progress in response to a global challenge.”
  - “Allocating a portion of the tax to market countries is new and efficient, offering a preferable multilateral approach to unilateral digital-services taxes.”
  - “Implementing a global minimum corporate income tax would reduce pressures from profit shifting and tax competition, raising global corporate income tax revenues by about” (text truncated in source).

### Key statistics and institutional counts (verbatim)
- OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting: “it currently has 141 member countries and 14 observer organizations.”
- Global Forum on Transparency and Exchange of Information for Tax Purposes: “currently with 163 members.”
- Paris Agreement: “a treaty adopted by 196 parties at the COP21 in 2015.”
- Estimates cited for small, low-tax jurisdictions:
  - “11–36 percent of multinational profits in small low-tax jurisdictions”
  - “8 percent of worldwide financial household wealth.”
- Emissions concentration: “China, the European Union, India, and the United States together are responsible for 64 percent of global emissions.”

*International Monetary Fund | April 2022 — content extracted from the provided chapter and references text.*

### 5.7 percent through the top-up tax and poten-

### CHAPTER 2 COORdINATINg TAxATION ACROSS BORdeRS

### Overview of the Inclusive Framework agreement and central questions
- The October 2021 agreement is described as a watershed moment in international tax coordination; implementation risks and refinements remain important.
- Two central questions in coordinating taxation of multinationals:
  - Where to tax? Current arrangements split taxation between headquarters (residence) countries and source countries, and ignore the consumer/user (destination) location; this is ill-suited to a digitalized globalized economy and has generated unilateral digital-services taxes.
  - How much to tax? Corporate tax rates have trended downward due to enforcement difficulties (profit shifting) and tax competition through rates and preferential regimes.

### Major elements of Pillars 1 and 2
- Participation:
  - To date, 137 jurisdictions (of 141 Inclusive Framework members) have joined the two-pillar Inclusive Framework agreement.
- Pillar 1 (addresses "where"):
  - Allocates a portion of profits to market jurisdictions even without physical presence.
  - Applies to multinationals with global turnovers above €20 billion.
  - Allocates 25 percent of “excess” or “residual” profit (profits exceeding 10 percent of global revenue) to market jurisdictions using sales by destination.
  - Extractives sector and regulated financial services are excluded.
  - Implementation requires a multilateral treaty obligating removal of unilateral digital-services taxes and similar measures, with a commitment not to introduce new ones.
  - Implementation is mandatory for all signatory jurisdictions, with planned effect in 2023.
  - A parallel Pillar 1 workstream aims to simplify computation of profits from specific activities for source-country taxation.
- Pillar 2 (addresses "how much"):
  - Agreement on a global minimum corporate income tax if income in a given country is taxed below 15 percent.
  - Covers multinationals with global turnover exceeding €750 million.
  - The minimum tax is a common approach (not mandatory to implement), but joining countries accept its adoption by others.
  - Includes three interrelated tax rules planned to go into effect in 2023:
    - Income inclusion rule: headquarters country subjects profits of affiliates abroad to a top-up tax if affiliates are effectively taxed below 15 percent.
    - Undertaxed-payments rule: if the headquarters country does not apply the income inclusion rule and taxes are below the minimum, the source country applies the top-up minimum tax; draft model rules enable adoption of special domestic top-up taxes as opposed to general increases in tax rates.
    - Subject-to-tax rule: low-income source countries can impose withholding taxes on specific cross-border payments if a multinational is taxed on receipt of those gross payments abroad below a minimum rate; details (scope and minimum rate) are yet to be finalized, but tax paid under this rule would count in income inclusion and undertaxed-payments calculations and thus has priority.

### Decomposition of multinationals’ profit
- Multinationals generated profit of $7.9 trillion in 2019 (9.2 percent of global GDP).
- Illustrative estimates suggest a sizable share of multinationals’ profit is excess profit, possibly reaching 60 percent, based on simplifying ratios (normal profits assumed 5.0–7.5 percent of total assets or of cost of goods sold).
- A fourth measure using 5–10 percent of revenue reduces excess profits to 37 percent of total profits.
- Excess profit is largely associated with monopolistic power and firm-specific intangible assets; taxing economic rent is efficient because it does not distort investment decisions.

### Revenue effects of Pillars 1 and 2
- Pillar 1:
  - Is a relocation of revenue (zero sum of losers and winners).
  - Estimated to apply to about 140 companies, capturing a small global tax base of 2 percent of global profit (about $150 billion).
  - Revenues are reallocated from low-tax investment hubs to other countries, raising revenues by 0.7 and 0.9 percent of corporate tax revenues in low-income countries and advanced economies, respectively.
  - Global tax revenue from Pillar 1 is relatively small as a share of total taxes and broadly comparable with existing unilateral digital-services taxes (which typically raise less than 0.02 percent of a country’s GDP).
- Pillar 2:
  - Estimated to capture a tax base of $1.47 trillion.
  - Increases global annual corporate income tax revenues by roughly 5.7 percent (about $150 billion) when applying the carve-out (deduction of 8 percent of assets and 10 percent of payroll).
  - Removing the carve-out would increase Pillar 2 revenues to an estimated 9 percent of current global corporate income tax revenues.
  - Under the assumption that low-tax countries remain below the minimum, static revenue gains are concentrated in advanced economies because multinationals headquartered in these countries generate 20 times more profit than those in emerging market economies.
  - If all source countries apply the minimum, source countries will capture the revenue gains (the amount is the same because it is a top-up tax).
  - Estimated global annual corporate income tax revenues under Pillar 2 decrease to 4.8 percent if the United States is excluded (it levies its own minimum tax, the global intangible low-taxed income provision).
- Combined effects:
  - Pillar 2 raises global corporate income tax revenues by 5.7 percent through the top-up tax and by an extra 8.1 percent potentially through reduced tax competition (with and without the carve-out shown as 5.7 percent with carve-out and 7.6 percent without carve-out in figure notes).

### Reactions of firms and countries to coordination
- Firms’ reactions:
  - Profit shifting by in-scope multinationals generally decreases if the effective minimum rate exceeds what firms currently pay and tax rate differentials decline; this reduces global profit reported in low-tax jurisdictions and increases revenues elsewhere.
  - Pillar 1 also helps reduce profit shifting.
  - Investment becomes more costly on average because the effective tax rate on investment increases due to reduced profit shifting and higher taxation; the OECD (2020) estimates an increase in the effective tax rate of 1.4 percentage points (global weighted average), with variation across countries.
  - Estimates indicate aggregate investment in fixed assets remains roughly constant at a global minimum tax of 15 percent, but country-specific effects can be large, reaching a decline of 20 percent in some low-tax countries.
- Countries’ reactions:
  - Low-tax countries are likely to raise taxes to the minimum—possibly only on in-scope companies—because countries are permitted to impose a minimum tax only on in-scope companies under the Inclusive Framework agreement; the top-up tax enables low-tax countries to collect revenues from multinationals without raising their general corporate tax rate, weakening incentives to raise the general rate.
  - Raising the general rate can be beneficial for low-tax countries, especially if high-tax countries raise their rates as well.
  - High-tax countries are likely to halt the downward trend and possibly raise their corporate taxes; empirical evidence suggests a 1-percentage-point change in the average foreign statutory tax rate leads the home rate to change by up to 0.6 percentage point in the same direction.

### Domestic tax reforms and future coordination priorities
- Domestic tax reforms are key to complementing revenue gains from the agreement, including revisiting wasteful tax incentives and better taxation of monopolistic rent on efficiency, equity, and revenue grounds.
- Future coordination efforts should focus on addressing remaining needs of low-income countries.
- Implementation risks and potential refinements are central as the international community shifts focus to implementation and beyond.

*Source: IMF staff compilation as presented in CHAPTER 2, Fiscal Monitor: Fiscal Policy from Pandemic to War, April 2022.*

### Annex 2.2). Concurrent discussions in some countries

### Annex 2.2). Concurrent discussions in some countries

### Pillar 2, tax competition, and revenue effects
- Pillar 2 reduces competition pressures: multinationals would not react to a tax holiday, for example, because they would then be liable for tax in the headquarters country.
- Rough estimates suggest that the agreement would result in reduced tax competition, thereby increasing global corporate tax revenues by an extra 8.1 percent (Figure 2.3, panel 2).
- The calculation assumes that below-minimum countries raise their rates to the minimum—and, in turn, other countries raise their rates by 0.6 percentage point in reaction to each 1 percentage point increase in the world average rate.
- As a result, the average world corporate tax rate rises from 22.2 to 24.3 percent.
- The higher tax would have a muted effect on aggregate investment of multinationals in the presence of a global minimum tax.

### Opportunities to enhance coordination (post–two-pillar implementation)
- The two-pillar solution demonstrates that coordination can succeed; Pillar 1 breaks with old norms and Pillar 2 puts a floor on tax competition.
- The agreement is limited in scope; following implementation, further steps will be needed to address spillovers and better incorporate low-income countries’ interests.
- Building on the two pillars, suggested actions include:
  - Agree on simplification measures (based on those delayed under Pillar 1) that allow source (mostly low-income) countries to apply a simplified tax (for example, a fixed sales ratio) to some activities (such as buying from affiliated companies for resale, “redistribution activity”). Such simplifications lower administrative and compliance costs but entail a margin of error in taxing actual returns, with possible adverse efficiency effects. Such costs are estimated to be the lowest for redistribution activity and a few subsectors of manufacturing—indicating that simplifications could be extended to include them (Beer, Leduc, and Loeprick 2022).
  - Maximize the benefits of a minimum tax for low-income countries by considering withholding taxes on a wider set of cross-border payments than currently envisaged under Pillar 2’s subject-to-tax rule.
  - Facilitate timely access to the country-by-country information on multinationals on the part of low-income developing countries to support tax enforcement. A recent analysis finds that only three low-income countries have access to these reports (OECD 2021a). Other low-income countries cannot access this information until they meet requirements concerning confidentiality, consistency, and appropriate use of information.
- Existing rules to curb profit shifting remain important. The agreement reduces, but does not eliminate, profit-shifting possibilities; a multitiered framework is likely because various exceptions leave current corporate tax arrangements largely applicable.
- International coordination makes domestic corporate tax reforms more feasible, particularly reforms to better tax monopolistic rent on efficiency, equity, and revenue grounds. For instance, one option to target excess profit is to offer deductions to returns to equity (like those to interest expenses) and increase the tax rate. Such deductions are efficient because they resolve the chronic debt bias in corporate taxation, which encourages debt by allowing interest deductions without analogous deductions for returns to equity.

### Tax transparency and personal income tax coordination — At a glance
- Curbing tax evasion requires availability, sharing, and effective use of information.
- Significant steps have been taken to exchange information among countries under the Global Forum on Transparency and Exchange of Information for Tax Purposes.
- Establishing beneficial-ownership registries would enhance tax enforcement and compliance, and further capacity building—for example, to upgrade tax administration technology—is critical for enabling low-income countries to reap the full benefits from cross-border information-sharing agreements.
- Stronger enforcement, through international information coordination, offers opportunities to revisit personal income taxation to address increasing income inequality.
- As the mobility of workers—including digital nomads—increases with the expansion of opportunities for cross-border remote work, coordination in this area will likely gain importance.

### Tax evasion, offshore wealth, and enforcement challenges
- Global undisclosed offshore wealth is estimated at $7 trillion (8 percent of global household wealth or 9.3 percent of global GDP; Zucman 2013; Alstadsæter, Johannesen, and Zucman 2018). Estimates suggest this hidden wealth corresponds to roughly $150 billion in unpaid income tax annually. This calculation assumes that hidden wealth (1) earns a rate of return of 7 percent (the five-year average return on US federal funds and the MSCI World Index, with 75 percent of offshore funds invested in securities markets) and (2) would be taxed at 28 percent (the average capital income tax rate, weighted by GDP).
- Wealth generates capital income (rental income, dividends, interest, and capital gains). Top-of-distribution capital income is significant, and available estimates suggest that the wealthiest 1 percent (who own up to 40 percent of the wealth in some countries) evade up to 25 percent of their income taxes using offshore structures (Alstadsæter, Johannesen, and Zucman 2019; Guyton and others 2021).
- Governance-related concerns arise about the sources of undisclosed wealth; the proportion of wealth held abroad correlates with political and economic instability, natural resources, and inflows of foreign aid in source countries.
- Enforcing capital taxation requires reliable third-party information, including from other countries. Difficulties include:
  - Information sharing: foreign authorities must be willing and legally able to share information.
  - Information availability: determination of beneficial ownership can be obscured by shell companies or trusts; based on leaked data, 80 percent of financial assets in one sample are held by entities rather than individuals and the location of the beneficial owner is generally different from that of the legal owner (Collin 2021).
- The rise of crypto assets and lax reporting requirements complicates tax enforcement and increases evasion risks; some countries exempt crypto-asset gains from taxes, with potential spillovers.

### International arrangements for exchanging information
- After the global financial crisis, in 2009 the G20 restructured the Global Forum (163 member jurisdictions), the primary multilateral body for global transparency and exchange of information standards.
- In 2014, the Global Forum reached an agreement on automatic exchange of information. To date, 120 countries are committed to implementing the standard outlined in the agreement (among large advanced economies, the United States is a notable exception).
- Under the standard, financial institutions report predefined financial information on nonresidents to domestic tax authorities, who then share it automatically and annually with tax authorities where the account holders are tax resident.
- Additional channels include bilateral tax information exchange agreements, ad hoc requests, Foreign Account Tax Compliance Act (introduced by the United States in 2010), and regional forms of cooperation (joint audits, risk assessments, tracing cross-border debtors and assets, and tackling cybercrimes and crypto threats).

### Benefits from exchange of information and observed impacts
- Automatic exchange of information globally covered nearly 75 million financial accounts in 102 jurisdictions in 2020 (OECD 2021c).
- Through the Foreign Account Tax Compliance Act, 110 countries currently provide information to the United States.
- Empirical studies suggest that information sharing reduced bank deposits in low-tax jurisdictions by 11–38 percent and portfolio investment from low-tax jurisdictions by 21–29 percent (Menkhoff and Miethe 2019; O’Reilly, Ramirez, and Stemmer 2019).
- Behavioral responses dampen effectiveness: shifting hidden wealth to locations with less-stringent regulations or fewer information-sharing agreements, using citizenship-by-investment schemes, or shifting wealth to assets not easily reported under agreements.

### Implementation constraints, capacity, and usage of incoming information
- Some low-income countries have not realized full benefits from exchange of information because they lack confidentiality and data-safeguarding standards, domestic legal frameworks requiring financial institutions to collect and report information, and systems/processes (including appropriate information technology).
- IMF staff survey covering tax authorities from 72 countries (of which 18 are not members of the Global Forum) found:
  - 9 countries did not receive information from abroad in 2019 through any channel.
  - Another 20 countries received no more than 10 incoming exchanges.
  - Among those that received information, almost half responded that they did not use the information in their risk and tax enforcement analyses.
- Capacity constraints in data analytics and knowledge management are an additional hurdle. Use of incoming information in compliance risk analysis is strongly correlated with tax administrations’ adoption of adequate information technology and with the presence of a dedicated unit focusing on high-net-worth individuals.
- Countries are taking actions against professional enablers of tax crimes (communication with taxpayers and intermediaries, mandatory-disclosure rules, fines for facilitators). International cooperation is essential for success in tackling enablers.

*Source: Annex 2.2). Concurrent discussions in some countries — text (Fiscal Monitor chapter content).*

### CHAPTER 2 COORdINATINg TAxATION ACROSS BORdeRS

### CHAPTER 2 COORdINATINg TAxATION ACROSS BORdeRS

### International coordination and enforcement
- The J5 (Australia, Canada, The Netherlands, United Kingdom, and United States) formed an operational alliance in 2018 to pool resources, share intelligence, and unite investigators and data scientists; J5 investigations ultimately led to the prosecution of a fraudulent crypto-asset scheme in 2020 (OECD 2021b).
- International coordination supports tax enforcement and compliance and can enable stronger personal taxation policy to address income and wealth inequalities.
- Information sharing across borders reduces opportunities to use offshore structures to minimize taxes and can be complementary to high taxation at the top (Keen and Slemrod 2017).
- Effective use of information can reveal tax loopholes that may not be illegal; domestic tax laws can be upgraded to capture such loopholes if that is the policy intention.
- Better technology and specialized tax units are correlated with the use of incoming information in risk analysis (IMF staff analysis based on a survey of 72 countries and the International Survey on Revenue Administration database, 2017).

### Personal tax implications of geographic relocation and mobility
- Wealth mobility across borders for tax purposes is mainly—but not only—on paper, as opposed to the actual migration of wealth holders.
- Labor is generally less mobile than capital, but physical mobility becomes more attractive when personal tax rates vary across countries and when preferential tax regimes target specific groups from abroad (retirees, high-skilled workers, managers, the super-rich).
- Kleven and others (2020) find evidence that mobility decisions respond to cross-border differences in personal taxation, while acknowledging that nontax factors also matter.
- Tax-induced mobility has been concentrated at the top of the income and wealth distributions and varies across occupations and countries.

### Cross-border remote work: estimated revenue and distributional effects
- Since the onset of the COVID-19 pandemic, the number of countries offering digital-nomad visas has increased from 16 to 40.
- Rough estimates suggest that personal tax differentials across countries, coupled with the ease of remote work, reallocate annually about $40 billion of personal income tax base globally (1¼ percent of the total personal income tax base in the sample; Online Annex 2.4).
- Country-specific estimates of the average potential revenue loss and gain are between 0.1 and 0.2 percent of GDP.
- Small emerging market economies with below-average tax rates and good remote work capability typically gain tax base.
- The estimated tax revenue implications of cross-border remote work are small, but personal tax coordination will likely gain importance, raising questions about where active labor income is taxed (source country or residence country), whether remote work creates a physical presence of the employer, and how to avoid double taxation.
- The estimates do not consider restrictions to international labor mobility, possible double taxation of income, and the potential for investment incomes to move with people.

### Carbon-pricing coordination — overview and rationale
- Global warming is threatening the planet; the window for containing climate change to manageable levels is closing rapidly, and international coordination is urgently needed.
- An internationally coordinated carbon price floor among key large emitters—in the form of a carbon tax designed flexibly to accommodate equity considerations and constraints on national policies—can, in conjunction with Paris mitigation pledges, reduce emissions by 32 percent by 2030, thereby keeping warming below 2°C.
- A carbon price floor can readily accommodate emissions-trading systems; the equivalent carbon price of other approaches (renewables policies, emission-rate standards, feebates) can be mapped.
- Other instruments do not trigger the full demand response that carbon pricing does to promote the whole range of mitigation opportunities.
- Unilateral border carbon adjustments would be far less effective at scaling up global mitigation than a comprehensive carbon-pricing regime, because emissions in traded products are typically well below 10 percent of countries’ total emissions.

### Gaps in mitigation ambition and policy
- About 140 countries, representing more than 85 percent of greenhouse gas emissions, have committed to net-zero emissions by around midcentury.
- Even if mitigation pledges were fully achieved, global CO2 would be cut by only one-third to two-thirds of the reductions needed by 2030 to limit global warming to 1.5°C to 2°C above preindustrial levels.
- Measures equivalent to a global carbon price exceeding $75 per ton are needed by 2030, whereas the global average emission price is currently only $4 per ton (High-Level Commission on Carbon Prices 2017; Black and others 2022).
- An additional international mechanism to complement the Paris Agreement, with a concrete plan to deliver the required emission reductions in 2030, is critical.

### Coordinated carbon-pricing regime: design and scope
- Key element: a carbon price requirement for participants, with prices set to align emissions with global temperature goals; a price floor requirement is preferable because it provides flexibility for countries to impose higher carbon prices.
- The agreement can allow countries to use carbon taxation or emissions-trading systems and retain flexibility for alternative or complementary policies (partial pricing, regulations, fiscal incentives).
- If emission reductions from alternative policies can be convincingly assessed, an equivalent economywide carbon price can be estimated using country-specific information (IMF and World Bank staff have developed a method; Online Annex 2.5).
- A few key emitters could make a crucial start. For illustration:
  - An agreement among China, the European Union, India, and the United States would cover 64 percent of baseline global CO2 emissions in 2030.
  - An agreement among the G20 members (encompassing all European Union countries) would cover 85 percent.
- The regime might initially apply to CO2 emissions from the power and industrial sectors, then extend to all fossil fuel CO2 emissions and, as monitoring evolves, to broader sources (for example, agriculture and methane leaks).
- The regime would need to address differentiated responsibilities of developing countries, potentially by differentiating price floor requirements by development level and via supplementary mechanisms for financial and technological assistance, a priority for low-income countries and emerging market economies.

### Scenario of an international carbon price floor — illustrative simulation and outcomes
- Reinforcing existing pledges with a price floor could cut global CO2 emissions by 29 percent below baseline levels (illustrative computation for an international carbon price floor on fossil fuel CO2 emissions in 2030 aligned with keeping global warming below 2°C).
- The illustrative price differentiation by development level: $75 per ton for advanced economies, $50 per ton for high-income emerging market economies such as China, and $25 per ton for low-income emerging market economies such as India.
- The simulation suggests that participation by only six G20 members (Canada, China, the European Union, India, the United Kingdom, and the United States) could be sufficient in the illustrative case.
- When all G20 members participate in the price floor, global emissions decrease by 32 percent.
- Existing mitigation pledges would cut global CO2 emissions in 2030 only by 20 percent below baseline.
- Under the illustrative pricing regime, emission reductions in 2030 are about 35–50 percent below baseline for advanced economies and 20–30 percent for emerging market economies.
- The pricing floor (rather than the mitigation pledge) is binding for 6 out of 10 emerging market economies, but for only one advanced economy.

### Macroeconomic and fiscal implications of carbon pricing
- Applying a dynamic computable general equilibrium model to a cooperative international pricing scenario, Chateau, Jaumotte, and Schwerhoff (2022) find that the GDP effects are modest if revenues from carbon pricing are used productively and needed energy investments materialize.
- Implementing carbon-pricing requirements would mobilize new revenue ranging between 0.7 and 2.9 percent of GDP, depending on the CO2 price and the CO2 intensity of GDP.
- Abatement costs under the illustrative regime vary from 0.2 to 1 percent of GDP for most countries.
- Costs on average are highest for advanced economies and lowest for low-income countries and emerging market economies, with some exceptions—for example, costs are more than 1 percent of GDP in South Africa, reflecting high emission intensity of the country’s GDP.
- Domestic environmental cobenefits of carbon pricing—notably reductions in mortality from local air pollution—can offset a large portion of these costs and substantially exceed them in several large emerging market economies.

*CHAPTER 2 COORdINATINg TAxATION ACROSS BORdeRS — International Monetary Fund | April 2022*

### CHAPTER 2 COORdINATINg TAxATION ACROSS BORdeRS

### CHAPTER 2 COORdINATINg TAxATION ACROSS BORdeRS

### Carbon Taxes and Equivalent Measures under a Coordinated Regime
- International pricing regimes can accommodate both carbon taxes and emissions-trading systems (ETS); in ETS the government sets a cap on allowed emissions, firms obtain permits, and market trading establishes the allowance or emission price.
- A domestic price floor mechanism or appropriate scaling of the cap can align domestic prices with international requirements.
- About 30 pricing schemes have been implemented at the European Union and national levels.
- Coverage rates and prices across schemes vary considerably:
  - Coverage rates: below 30 percent of greenhouse gases in some cases and above 70 percent in others.
  - Prices: below $20 per ton in many cases but well above $50 per ton in others.
- CO2 reductions shown in Figure 2.8 result from either a country’s mitigation pledge or the illustrative carbon price floor, whichever is more stringent; emission reductions are 20–55 percent below baseline (selected countries, 2030).
- The EU ETS forecast price for 2030 is based on BloombergNEF: 108 euros per ton CO2 by 2030.
- Carbon prices cited are from April 1, 2021 (World Bank); the EU ETS price cited is from July 19, 2021 (EMBER). Data on greenhouse gases are from 2018.
- Alternative policies that aim for equivalent emission reductions to carbon pricing include renewables policies, emission-rate standards, feebates, clean-technology subsidies, and taxes on individual fuels; however, regulatory and fiscal instruments may not trigger the full demand response that carbon pricing does (example: vehicle CO2 standards encourage lower-emission vehicle sales but do not encourage driving less).
- Online Annex 2.5 illustrates potential CO2 reductions under alternative mitigation policies relative to those under carbon pricing.

### Unilateral Border Carbon Adjustment
- Without an international carbon-pricing regime, unilateral border carbon adjustments (BCAs) are likely to emerge; a BCA imposes charges (or allowance purchase requirements) on imports for embodied carbon (CO2 emitted in production of imports).
- A BCA is motivated by concerns about carbon leakage and competitiveness; limiting scope to energy-intensive, trade-exposed industries (for example, iron, steel, aluminum, petroleum products, and cement) would focus on sectors with the most severe concerns and limit administrative burdens.
- BCAs face legal, equity, and effectiveness concerns:
  - Uncertainties about compatibility with World Trade Organization rules.
  - Potential disproportionate effects on developing-country competitiveness; industries in large emerging market economies often have two to four times the embodied carbon of advanced economy industries.
  - BCAs would be far less effective at scaling up global mitigation than a comprehensive carbon-pricing regime because they price emissions only in traded products, which are typically less than 10 percent of countries’ total emissions.
- A possible mitigation: base the adjustment on domestic industry emission rates for all trading partners.
- BCAs can create incentives for countries to remain in a pricing regime rather than withdraw. Illustrative estimates of penalties (based on EU carbon intensity and a $75 per ton price):
  - If the United States unilaterally withdrew from a carbon-pricing regime in which all other G20 countries participated, other countries would collect an estimated $13 billion (0.06 percent of GDP) a year on imports from the United States.
  - If China unilaterally withdrew, revenue collections on its exports would be $62 billion (0.42 percent of GDP).
  - If India unilaterally withdrew, revenue collections on its exports would be $9 billion (0.32 percent of GDP).
- Combining a carbon-pricing regime with a BCA raises two issues:
  - All participants in the pricing regime would likely need to impose carbon pricing, at least for domestic emissions from energy-intensive, trade-exposed industries, otherwise a country without these emission charges may not be able, under World Trade Organization rules, to impose charges on embodied emissions for imports.
  - A common external BCA would need to be agreed upon, which might limit the scope for varying the pricing of industrial emissions according to development levels.

### Supports for Domestic Pricing and International Coordination
- Carbon pricing remains difficult domestically in many countries because of opposition to higher energy prices and the contraction of fossil fuel–reliant activities, especially given recent surges in energy prices.
- A comprehensive strategy with supporting elements can enhance prospects for reform; possible supports include:
  - Reinforcing pricing with sectoral-based regulations and feebates (which have less of an effect on energy prices).
  - Using carbon-pricing revenues to equitably boost the economy.
  - Robust assistance measures for vulnerable groups.
  - Gradual phase-in of reforms in consultation with stakeholders.
- International policy coordination is essential and urgent to overcome obstacles to unilateral action. Immediate priorities:
  - Continued dialogue on, and supporting analysis of, potential coordination regimes across multiple fora (for example, G7, G20, COP27, Coalition of Finance Ministers for Climate Action, and bilateral discussions).
  - Regional price floor arrangements could be implemented and provide valuable experience toward a global price floor arrangement (several countries in Latin America already have carbon taxes; several in Asia and the Pacific have implemented or are considering carbon pricing).

### Box 2.1 — The Need for Timely and Accurate Beneficial-Ownership Information
- Definition:
  - Beneficial owner is the natural person who ultimately owns or controls a legal entity (such as a company) or legal arrangement (such as a trust).
  - Always a person at the end of an ownership or control chain; differs from legal ownership (which can be another company or trust that is a shareholder).
  - The IMF uses the Financial Action Task Force definition of beneficial ownership, which has also been adopted by the Global Forum.
- Implementation measures:
  - Identify beneficial owners when a company is created, and when changes to ownership and control are made.
  - Centralize verified and up-to-date information into a database: establish a beneficial-ownership registry (for example with company registries, financial-intelligence units, and tax authorities).
  - Provide access to the registry: if not public, at minimum government entities (including tax authorities), financial institutions, and gatekeepers (for example, lawyers, accountants, notaries, and trust and company service providers) should have access.
  - Use a multipronged approach: require companies and trusts to know their own beneficial owners, incorporate beneficial-ownership identification in customer due diligence processes, and use beneficial-ownership information for public procurement.
- Rationale: Effective beneficial-ownership information is pivotal for tax authorities to obtain, verify, and use; complex ownership structures and multiple jurisdictions allow criminals to hide identity and origins of assets, facilitating tax evasion and other crimes. Authorities should assess—and design measures to mitigate—risks from such activities.

*International Monetary Fund. CHAPTER 2 COORdINATINg TAxATION ACROSS BORdeRS. Fiscal Monitor: Fiscal Policy From Pandemic to War, April 2022.*

### CHAPTER 2 COORdINATINg TAxATION ACROSS BORdeRS

### CHAPTER 2 COORdINATINg TAxATION ACROSS BORdeRS

### Key glossary definitions (selected)
- Automatic stabilizers: Revenue and some expenditure items that adjust automatically to cyclical changes in the economy—for example, as output falls, revenue collections decline and unemployment benefits increase, which “automatically” provides demand support.
- BEPS: Base erosion and profit shifting (BEPS) refers to tax planning strategies used by multinational enterprises that exploit gaps and mismatches in tax rules to avoid paying tax.
- Border carbon adjustment: Levy charged on the unpriced carbon emissions embodied in imports (perhaps with remittances for domestic carbon taxes on exports).
- Carbon dioxide (CO2): The main greenhouse gas, produced from burning fossil fuels, manufacturing cement, and forest practices. CO2 has an average atmospheric residence time of 100 years.
- Carbon price floor arrangement: A proposal to complement the Paris Agreement with an agreement among large emitting countries to impose a minimum price on carbon emissions. The arrangement could be designed flexibly to accommodate carbon taxes, emission trading systems, or other mitigation approaches and perhaps with differentiated responsibilities to entice participation by emerging market economies.
- Carbon tax: A tax imposed on CO2 releases emitted largely through the combustion of carbon-based fossil fuels. Administratively, the easiest way to implement the tax is through taxing the supply of fossil fuels—coal, oil, and natural gas—in proportion to their carbon content.
- Contingent liabilities: Obligations that are not explicitly recorded on government balance sheets and that arise only in the event of a particular discrete situation, such as a crisis.
- Cyclically adjusted balance (CAB): Difference between the overall balance and the automatic stabilizers; equivalently, an estimate of the fiscal balance that would apply under current policies if output were equal to potential.
- Cyclically adjusted primary balance (CAPB): Cyclically adjusted balance excluding net interest payments (interest expenditure minus interest revenue).
- Emissions-trading system: A market-based policy to reduce emissions (sometimes referred to as cap-and-trade). Covered sources are required to hold allowances for each ton of their emissions or (in an upstream program) the embodied emissions content in fuels. The total quantity of allowances is fixed, and market trading of allowances establishes a market price for emissions. Auctioning the allowances provides a valuable source of government revenue.
- Global corporate minimum tax: A global minimum tax on corporate profits is an agreement to limit tax competition among countries by putting a floor on effective tax rates applied to income of large multinational corporations.
- Global Forum on Transparency and Exchange of Information for Tax Purposes: An international body working on the implementation of global transparency and exchange of information standards. As of April 2022, it has 163 member countries.
- Government financing needs (also gross financing needs): Overall new borrowing requirement plus debt maturing during the year.
- Gross debt: All liabilities that require future payment of interest and/or principal by the debtor to the creditor. This includes debt liabilities in the form of special drawing rights, currency, and deposits; debt securities; loans; insurance, pension, and standardized guarantee programs; and other accounts payable. (See the IMF’s 2001 Government Finance Statistics Manual and Public Sector Debt Statistics Manual.) The term “public debt” is used in the Fiscal Monitor, for simplicity, as synonymous with gross debt of the general government, unless specified otherwise. (Strictly speaking, public debt refers to the debt of the public sector as a whole, which includes financial and nonfinancial public enterprises and the central bank.)
- Inclusive Framework: Member countries work together on developing and implementing standards on Base Erosion and Profit Shifting (BEPS). It was established in 2016 for countries to collaborate on implementing the BEPS initiative. As of April 2022, it has 141 member countries and 14 observer organizations.
- Net debt: Gross debt minus financial assets corresponding to debt instruments. These financial assets are monetary gold and special drawing rights; currency and deposits; debt securities; loans, insurance, pensions, and standardized guarantee programs; and other accounts receivable.
- Output gap: Deviation of actual from potential GDP, in percent of potential GDP.
- Overall fiscal balance (also “headline fiscal balance”): Net lending and borrowing, defined as the difference between revenue and total expenditure, using the IMF’s 2001 Government Finance Statistics Manual (GFSM 2001). Does not include policy lending.
- Primary balance: Overall balance excluding net interest payments (interest expenditure minus interest revenue).
- Special drawing rights (SDRs): An international reserve asset created by the IMF to supplement the official reserves of its member countries. It is not a currency but a potential claim on the freely usable currencies of IMF members.

### Methodological and data conventions (selected)
- Data sources and scope:
  - Country-specific data and projections for key fiscal variables are based on the April 2022 World Economic Outlook database, unless indicated otherwise, and compiled by IMF staff.
  - Historical data and projections are based on IMF country desk information gathered in missions and ongoing analysis; data are updated continually as more information becomes available.
  - IMF staff estimates serve as proxies when complete information is unavailable; Fiscal Monitor data may differ from official data in other sources, including the IMF’s International Financial Statistics and the Government Finance Statistics Manual (GFSM 2014).
  - Sources for fiscal data and projections not covered by the World Economic Outlook database are listed in the respective tables and figures.
- Country classification and groupings:
  - The world is divided into three major groups: 39 advanced economies, 96 emerging market and middle-income economies, and 59 low-income developing countries.
  - Fiscal Monitor tables display 35 advanced economies, 40 emerging market and middle-income economies, and 40 low-income developing countries (the tables generally represent the largest countries within each group based on the size of their GDP in current US dollars).
  - The seven largest advanced economies as measured by GDP (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States) constitute the subgroup of major advanced economies (the Group of Seven, G7).
  - Composite data for country groups are weighted averages of individual-country data, weighted by annual nominal GDP converted to US dollars at average market exchange rates as a share of the group GDP.
  - For the purpose of data reporting in the Fiscal Monitor, the Group of Twenty (G20) member aggregate refers to the 19 country members and does not include the European Union.
- Accounting frameworks and comparability:
  - In most advanced economies, and in some large emerging market and middle-income economies, fiscal data follow the GFSM 2014 or are produced using national accounts methodology following the 2008 System of National Accounts (SNA) or ESA 2010.
  - Most other countries follow the GFSM 2001; some, including many low-income developing countries, have fiscal data based on the 1986 GFSM.
  - The overall fiscal balance refers to net lending and borrowing by the general government; in some cases it refers to total revenue and grants minus total expenditure and net lending.
  - Fiscal gross and net debt data are drawn from official sources and IMF staff estimates. Efforts are made to align with GFSM definitions, but data limitations or country circumstances can cause deviations; differences in sectoral and instrument coverage mean data are not universally comparable.
- Fiscal year and calendar reporting rules:
  - All fiscal data refer to calendar years, except for specified economies for which data refer to the fiscal year. The following economies’ data refer to the fiscal year: The Bahamas, Bangladesh, Barbados, Bhutan, Botswana, Dominica, Egypt, Eswatini, Ethiopia, Fiji, Haiti, Hong Kong Special Administrative Region, India, the Islamic Republic of Iran, Jamaica, Lesotho, Malawi, the Marshall Islands, Mauritius, Micronesia, Myanmar, Namibia, Nauru, Nepal, Pakistan, Palau, Puerto Rico, Rwanda, Samoa, Singapore, St. Lucia, Thailand, Tonga, and Trinidad and Tobago.
  - For economies whose fiscal years end before June 30, data are recorded in the previous calendar year. For economies whose fiscal years end on or after June 30, data are recorded in the current calendar year.
- Country-specific adjustments and notes (selected):
  - Australia, Canada, Hong Kong Special Administrative Region, and the United States: For cross-economy comparability, gross and net debt levels reported by national statistical agencies for economies that have adopted the 2008 SNA are adjusted to exclude the unfunded pension liabilities of government employees defined-benefit pension plans.
  - Brazil: General government data refer to the nonfinancial public sector (including the federal, state, and local governments, as well as public enterprises (excluding Petrobras and Eletrobras)) and are consolidated with data for the sovereign wealth fund. According to the national definition, gross debt amounted to 80.3 percent of GDP at the end of 2021.
  - Canada: For cross-economy comparability, gross and net debt levels reported by national statistical agencies for economies that have adopted the 2008 SNA (Australia, Canada, Hong Kong Special Administrative Region, and the United States) are adjusted to exclude unfunded pension liabilities of government employees defined-benefit pension plans.
  - Chile: Cyclically adjusted balances refer to the structural balance, which includes adjustments for output and commodity price developments.
  - China: Public debt data include central government debt as reported by the Ministry of Finance, explicit local government debt, and shares of contingent liabilities the government may incur, based on estimates from the National Audit Office estimate. IMF staff estimates exclude central government debt issued for China Railway. Fiscal balances are not consistent with reported debt, because no time series of data in line with the National Audit Office debt definition is published officially.
  - Colombia: Gross public debt refers to the combined public sector, including Ecopetrol and excluding Banco de la República’s outstanding external debt.
  - Dominican Republic: Public debt, debt service, and cyclically adjusted or structural balances are for the consolidated public sector (central government, the rest of the nonfinancial public sector, and the central bank); the remaining fiscal series are for the central government.
  - Greece: General government gross debt follows the GFSM 2014 definition and includes the stock of deferred interest.
  - Hong Kong Special Administrative Region: Data are on a fiscal year basis. Cyclically adjusted balances include adjustments for land revenue and investment income. For cross-economy comparability, gross and net debt levels reported by national statistical agencies for economies that have adopted the 2008 SNA are adjusted to exclude the unfunded pension liabilities of government employees defined-benefit pension plans.
  - Ireland: For 2015, if the conversion of the government’s remaining preference shares to ordinary shares in one bank is excluded, then the fiscal balance is −1.1 percent of GDP. Cyclically adjusted balances reported in Appendix Tables A3 and A4 exclude financial sector support measures. Ireland’s 2015 national accounts were revised as a result of restructuring and relocation of multinational companies, which resulted in a level shift of nominal and real GDP.
  - Japan: Gross debt is on an unconsolidated basis.
  - Latvia: The fiscal deficit includes bank restructuring costs and thus is higher than the deficit in official statistics.
  - Mexico: General government refers to the central government, social security funds, public enterprises, development banks, the national insurance corporation, and the National Infrastructure Fund, but excludes subnational governments.
  - Norway: Cyclically adjusted balances correspond to the cyclically adjusted non-oil overall or primary balance. These variables are a percentage of non-oil potential GDP.
  - Spain: Overall and primary balances include financial sector support measures estimated to be 0.3 percent of GDP for 2013, 0.1 percent of GDP for 2014.

### Editor’s note and data caveat
- EDITOR’S NOTE (4/20/22): Projections for Ukraine in 2022 and beyond, in Tables A9 through A15 and Table A24, are omitted due to an unusually high degree of uncertainty.
- Data in statistical tables are compiled on the basis of information available through April 8, 2022.
- The appendix comprises four sections: “Data and Conventions,” “Fiscal Policy Assumptions,” “Definition and Coverage of Fiscal Data,” and statistical tables on key fiscal variables.

### 0.1 percent of GDP for 2015, and 0.2 percent of GDP

### text - 0.1 percent of GDP for 2015, and 0.2 percent of GDP

### Country-specific fiscal notes
- 0.1 percent of GDP for 2015, and 0.2 percent of GDP for 2016.
- Sweden: Cyclically adjusted balances account for output and employment gaps. Fiscal estimates for 2021 are based on preliminary information on the fall 2020 budget bill. The impact of cyclical developments on the fiscal accounts is calculated using the 2014 Organisation for Economic Co-operation and Development elasticity to take into account output and employment gaps.
- Switzerland: Data submissions at the cantonal and commune levels are received with a long and variable lag and are subject to sizable revisions. Cyclically adjusted balances include adjustments for extraordinary operations related to the banking sector. The authorities’ announced discretionary stimulus—as reflected in the fiscal projections for 2021 and 2022—is permitted within the context of the debt brake rule in the event of “exceptional circumstances.”
- Thailand: Data are on a fiscal year basis.
- Turkey: Fiscal projections assume a more negative primary and overall balance than envisaged in the authorities’ New Economic Program 2021–23 (September 2020), partly from deterioration in the growth outlook related to the COVID-19 pandemic and partly from definitional differences. Projections in the World Economic Outlook and Fiscal Monitor are based on the IMF-defined fiscal balance, which excludes some revenue and expenditure items included in the authorities’ headline balance. The basis for the projections in the WEO and Fiscal Monitor is the IMF-defined fiscal balance, which excludes some revenue and expenditure items that are included in the authorities’ headline balance.
- Turkmenistan: Staff estimates, and projections of the fiscal balance exclude receipts from domestic bond issuances as well as privatization operations, in line with GFSM 2014. The authorities’ official estimates, which are compiled using domestic statistical methodologies, include bond issuance and privatization proceeds as part of government revenues.
- United States: For cross-economy comparability, expenditures and fiscal balances are adjusted to exclude the imputed interest on unfunded pension liabilities and the imputed compensation of employees, which are counted as expenditures under the 2008 SNA adopted by the United States but not for countries that have not adopted the 2008 SNA. Data for the United States may thus differ from data published by the US Bureau of Economic Analysis. In addition, gross and net debt levels reported by the Bureau of Economic Analysis and national statistical agencies for other economies that have adopted the 2008 SNA (Australia, Canada, and Hong Kong Special Administrative Region) are adjusted to exclude the unfunded pension liabilities of government employees defined-benefit pension plans.
- Uruguay: Data are for the nonfinancial public sector, which includes the central government, the local government, social security funds, nonfinancial public corporations, and Banco de Seguros del Estado. The coverage of fiscal data was changed from the consolidated public sector to the nonfinancial public sector with the October 2019 submission. Because of this narrower coverage, central bank balances are not included in the fiscal data.
- Venezuela: Fiscal accounts include the budgetary central government, social security funds, FOGADE (insurance deposit institution), and a sample of public enterprises, including Petróleos de Venezuela, S.A. (PDVSA). Data for 2018–21 are IMF staff estimates.

### Fiscal policy assumptions and projection methodologies
- Historical data and projections of key fiscal aggregates are in line with those of the April 2022 World Economic Outlook, unless noted otherwise.
- Short-term fiscal policy assumptions are based on officially announced budgets, adjusted for differences between the national authorities and IMF staff regarding macroeconomic assumptions and projected fiscal outturns.
- Medium-term fiscal projections incorporate policy measures judged likely to be implemented.
- When IMF staff has insufficient information to assess the authorities’ budget intentions and prospects for policy implementation, an unchanged structural primary balance is assumed, unless indicated otherwise.
- Afghanistan: All data and projections for 2021-27 are omitted because of an unusually high degree of uncertainty and given that the IMF has paused its engagement with the country due to a lack of clarity within the international community regarding the recognition of a government in Afghanistan.
- Ecuador: Fiscal sector projections are excluded from publication for 2022–27 because of ongoing program review discussions. The authorities are undertaking revisions of the historical fiscal data with technical support from the IMF.
- Lebanon: Projections for 2021–27 are omitted due to an unusually high degree of uncertainty.
- Tunisia: Projections are excluded from publication for 2023–27 because of ongoing technical discussions pending potential program negotiations.
- Ukraine: Projections for 2022–27 are omitted due to an unusually high degree of uncertainty.

### Country bases for projections (selected excerpts)
- Argentina: Projections are based on available information regarding budget outturn and budget plans for the federal government, on fiscal measures announced by the authorities, and on IMF staff macroeconomic projections.
- Australia: Based on data from the Australian Bureau of Statistics, the FY2022/23 budget published by the Commonwealth Government in March 2022, the FY2021/22 budget published by each state/territory government, the FY2021/22 budget update published by some state governments, and the IMF staff’s estimates and projections.
- Canada: Projections use the baseline forecasts from the Federal Budget 2022 and the latest provincial budgets, with IMF staff adjustments and recent data releases from Statistics Canada’s National Economic Accounts.
- China: After a significant tightening in 2021, the pace of fiscal tightening is projected to slow in 2022 based on Article IV consultation findings and public statements by the authorities.
- France: Projections for 2022 onward are based on the measures of the 2018–22 budget laws adjusted for differences in revenue projections and assumptions on macroeconomic and financial variables.
- Germany: Projections for 2022 and beyond are based on the provisional 2022 budget, the federal government’s medium-term budget plan, and data updates from Destatis and the ministry of finance, adjusted for IMF staff assumptions. The estimate of gross debt includes portfolios of impaired assets and noncore business transferred to institutions that are winding up as well as other financial sector and EU support operations.
- India: Projections are based on available information on the authorities’ fiscal plans, with adjustments for IMF staff’s assumptions. Subnational data are incorporated with a lag of up to one year. Starting in FY2020/21 expenditure also includes the off-budget component of food subsidies consistent with the revised treatment of food subsidies in the budget. The IMF staff adjusts expenditure to take out payments for previous years’ food subsidies, which are included as expenditure in budget estimates for FY2020/21.
- Russia (Russian Federation): The fiscal rule has been suspended by the government in response to the sanctions imposed after the invasion of Ukraine. The projection assumes an increase in discretionary spending as well as discretionary tax reductions which, combined, equal to the oil and gas revenues that would have been saved under the fiscal rule. The remaining decline in tax revenues is due to the projected deep recession.
- Saudi Arabia: Baseline fiscal projections are primarily based on its understanding of government policies as outlined in the 2022 budget. Export oil revenues are based on WEO baseline oil price assumptions and the IMF staff’s understanding of current oil policy under the OPEC+ agreement.

### Notable policy measures and numeric specifics (preserved verbatim)
- Singapore:
  - FY2020 figures are based on budget execution.
  - FY2021 projections are based on revised figures based on budget execution through end-2021.
  - FY 2022 projections are based on the initial budget of February 18, 2022.
  - The IMF staff assumes gradual withdrawal of remaining pandemic-related measures and the implementation of various revenue measures announced in the FY2022 budget for the remainder of the projection period. These include:
    - (i) the increase of the Good and Services Tax (GST) from seven percent to eight percent on January 1, 2023, and to nine percent on January 1, 2024;
    - (ii) the increase of the property tax in 2023 for non-owner-occupied properties (from 10-20 percent to 12-36 percent) and owner-occupied properties with an annual value in excess of $30,000 (from 4-16 percent to 6-32 percent); and
    - (iii) the increase of the carbon tax from S$5 per tonne to S$25 per tonne in 2024 and 2025 and $45 per tonne in 2026 and 2027.

### Data sources and adjustments (selected)
- Canada: Incorporates the most recent data releases from Statistics Canada’s National Economic Accounts, including quarterly federal, provincial, and territorial budgetary outturns.
- Poland: Data are based on the ESA 95 for 2004 and earlier. Data are based on the ESA 2010 beginning in 2005 on an accrual basis. Data for 2021 are estimates based on the 2021 budget and estimated COVID-19–related expenditures for the year. Projections begin in 2022, based on the 2022 budget and subsequent temporary tax relief measures known as the Anti-Inflation Shield.
- Singapore: Specific fiscal projection assumptions and schedule of tax and carbon tax changes as detailed above.

*International Monetary Fund | April 2022*

### 2022. Revenue projections are adjusted for differences

### 2022. Revenue projections are adjusted for differences between the IMF staff’s forecasts and authorities’ fiscal projections

### Fiscal policy assumptions and data conventions
- Revenue projections are adjusted for differences between the IMF staff’s forecasts of macroeconomic variables (such as GDP growth and inflation) and the forecasts of these variables assumed in the authorities’ fiscal projections.
- Projections include the fiscal policy measures included in the Spring Statement 2022 published by the Treasury on March 23, 2022.
- IMF staff data exclude public sector banks.
- Real government consumption and investment are part of the real GDP path, which, according to the IMF staff, may or may not be the same as projected by the UK Office for Budget Responsibility.
- Data are presented on a calendar year basis.
- Projections are based on staff assessments of current policies (see “Fiscal Policy Assumptions” in text).

### Country-specific projection adjustments and omissions
- United Kingdom:
  - Projections include measures from the Spring Statement 2022 (Treasury, March 23, 2022).
  - Real government consumption and investment are part of the real GDP path; IMF staff GDP path may differ from the UK Office for Budget Responsibility.
- United States:
  - Fiscal projections are based on the July 2021 Congressional Budget Office baseline, adjusted for the IMF staff’s policy and macroeconomic assumptions.
  - Projections incorporate the effects of the Bipartisan Infrastructure Investment and Jobs Act; the American Rescue Plan; the Coronavirus Preparedness and Response Supplemental Appropriations Act; the Families First Coronavirus Response Act; the Coronavirus Aid, Relief, and Economic Security Act; and the Paycheck Protection Program and Health Care Enhancement Act.
  - Fiscal projections are adjusted for the IMF staff’s forecasts for key macroeconomic and financial variables and different accounting treatment of financial sector support and of defined-benefit pension plans, and are converted to a general government basis.
  - Note: For cross-economy comparison, US expenditures and fiscal balances are adjusted to exclude the imputed interest on unfunded pension liabilities and the imputed compensation of employees (2008 SNA), so table figures for the United States may differ from US Bureau of Economic Analysis data.
- Venezuela:
  - Projections for 2022–27 are omitted due to an unusually high degree of uncertainty.
- Vietnam:
  - Projections starting 2021 use authorities’ 2021 budget numbers and staff own projections.
- Yemen:
  - Hydrocarbon revenue projections are based on World Economic Outlook assumptions for hydrocarbon prices and authorities’ projections for oil and gas production.
  - Nonhydrocarbon revenues largely reflect authorities’ projections and the evolution of other key indicators.
  - Over the medium term, IMF staff assume conflict resolution, a recovery in economic activity, and additional expenditures associated with reconstruction costs.
- Zambia:
  - General government net and gross debt projections for 2022–27 are omitted due to ongoing debt restructuring.

### Economy groupings and coverage
- Economy groupings used in the Fiscal Monitor: Advanced Economies, Emerging Market Economies, Low-Income Developing Countries; subgroups include G7, G20 (advanced and emerging), Euro Area, Emerging Market and Middle-Income Asia/Europe/Latin America/Middle East, Low-Income Developing Asia/Latin America/Sub-Saharan Africa/Others, Low-Income Oil Producers, and Oil Producers.
- Note: G7 = Group of Seven; G20 = Group of Twenty. 1 Does not include European Union aggregate.
- Coverage and accounting practice notation used across tables:
  - Coverage: CG = central government; GG = general government; LG = local governments; SG = state governments; SS = social security funds; TG = territorial governments; NFPC = nonfinancial public corporations; NFPS = nonfinancial public sector; NMPC = nonmonetary financial public corporations; PS = public sector; BCG = budgetary central government; BC = etc. (as used in the tables).
  - Accounting practice: A = accrual; C = cash; Mixed = combination of accrual and cash accounting.
  - Valuation of debt: “Nominal,” “Face,” and “Current market” definitions are provided in the notes.

### Key cross-economy fiscal aggregates and notable figures (selected highlights from tables)
- Advanced Economies: General Government Overall Balance (Percent of GDP), Average series (2013–2027):
  - Average: –3.7–3.1–2.6–2.6–2.4–2.5–3.0–10.5–7.3–4.3–2.9–2.8–3.0–3.0–3.0
  - Euro Area: –3.0–2.5–2.0–1.5–0.9–0.4–0.6–7.2–5.5–4.3–2.5–2.0–1.8–1.7–1.7
  - G7: –4.3–3.6–3.0–3.3–3.2–3.4–3.8–11.9–8.4–4.9–3.3–3.3–3.6–3.6–3.6
- Advanced Economies: General Government Primary Balance (Percent of GDP), Average series (2013–2027):
  - Average: –2.1–1.5–1.1–1.1–0.9–1.0–1.5–9.2–6.2–3.4–1.8–1.5–1.5–1.3–1.1
- Advanced Economies: General Government Revenue (Percent of GDP), Average series (2013–2027):
  - Average: 36.5 36.5 36.1 36.0 35.9 35.9 35.6 36.1 36.6 36.4 36.5 36.3 36.2 36.2 36.3
  - Euro Area: 46.8 46.8 46.4 46.2 46.1 46.4 46.2 46.3 47.1 46.4 46.3 46.1 45.9 45.7 45.6
  - G7: 36.2 36.4 36.3 36.0 35.9 35.9 35.8 36.1 36.6 36.6 36.7 36.5 36.4 36.4 36.6
- Advanced Economies: General Government Expenditure (Percent of GDP), Average series (2013–2027):
  - Average: 40.1 39.6 38.7 38.6 38.3 38.3 38.6 46.5 43.9 40.8 39.4 39.1 39.2 39.2 39.2
  - Euro Area: 49.8 49.2 48.4 47.7 47.1 46.8 46.9 53.5 52.6 50.7 48.8 48.1 47.7 47.5 47.3
- Advanced Economies: General Government Gross Debt (Percent of GDP), Average series (2013–2027):
  - Average: 104.0 103.6 103.2 105.6 103.2 102.7 103.8 123.2 119.8 115.5 113.7 113.1 113.0 112.9 112.7
  - G7: 118.4 117.3 116.4 119.5 117.4 117.3 118.1 140.8 137.3 131.6 129.3 128.8 128.9 129.0 129.1
  - United States (series excerpt): 104.6 104.6 105.1 107.2 106.2 107.5 108.8 134.2 132.6 125.6 123.7 124.0 125.1 126.2 127.4
- Advanced Economies: General Government Net Debt (Percent of GDP), Average series (2013–2027):
  - Average: 74.9 75.1 75.2 76.8 74.5 74.4 75.2 87.5 87.3 84.8 83.8 83.8 84.9 85.8 86.7

### Methodological notes and table-specific disclaimers
- “Overall fiscal balance” generally refers to net lending and borrowing of the general government; in some cases the concept refers to total revenue and grants minus total expenditure and net lending (table notes).
- “Primary balance” is defined as the overall balance excluding net interest payments.
- Valuation of debt: “Nominal” = valued at nominal values; “Face” = undiscounted principal amount; “Current market” = market prices (detailed definitions in notes).
- Country-specific coverage and valuation caveats are noted in tables (for example, data include/exclude financial sector support for certain countries; Brazil gross debt refers to the nonfinancial public sector excluding Eletrobras and Petrobras; Thailand excludes certain specialized financial institutions; Venezuela fiscal accounts include a sample of public enterprises; Norway and others have valuation or series revisions described).
- Several country tables note revisions or special coverage, for example:
  - Belgium’s net debt series revised for consistency between liabilities and assets.
  - Luxembourg, Norway, Iceland, Ireland, and others have specific net debt or asset-definition notes.
  - Ecuador’s and Egypt’s tables include notes about nominal GDP revisions and fiscal data revisions.

*Italic: Content summarized from the IMF Fiscal Monitor April 2022 methodological and statistical appendix as provided in the source text.*

### 0.6 percent of GDP in 2020, 0.2 percent of GDP in 2021, and zero thereafter. See IMF country report No. 19/64 for furthe

### Table A12 and Table A13 excerpts — Emerging Market and Middle-Income Economies (2013–27)

### Cyclically Adjusted Primary Balance (Table A12) — key aggregate patterns
- "Average" row (Percent of potential GDP): –0.7–0.8–1.7–2.0–1.6–1.8–2.6–5.8–3.2–4.2–3.8–3.7–3.6–3.5–3.4
- Asia (Percent of potential GDP): –0.6–0.4–1.6–2.2–2.0–2.7–4.0–6.9–4.2–5.3–4.7–4.7–4.7–4.6–4.6
- Europe (Percent of potential GDP): –0.7 0.1–1.0–1.1–0.5 1.0 0.2–3.8–1.1–3.7–3.4–3.1–2.7–2.2–1.8
- Latin America (Percent of potential GDP): –0.5–1.8–2.0–1.5–0.9–0.5 0.1–3.6–0.7 0.0 0.1 0.5 0.8 1.0 1.2
- G20 Emerging (Percent of potential GDP): –0.7–0.7–1.9–2.2–1.8–2.0–3.0–6.4–3.2–4.5–4.2–4.1–4.1–4.0–3.9

Selected country-level cyclically adjusted primary balance sequences (Percent of potential GDP):
- China: –0.4–0.2–1.7–2.4–2.4–3.3–4.9–8.1–4.5–6.1–5.5–5.6–5.6–5.6–5.6
- India: –2.0–2.2–2.5–2.8–1.4–2.0–2.7–3.9–3.8–3.6–3.2–2.8–2.4–2.2–1.9
- Brazil: 0.3–2.1–2.0–1.4–0.9–1.0–0.5–7.7 1.1–0.1–0.3 0.1 0.3 0.6 1.0
- Russia: –1.2 0.3–2.8–2.8–0.5 3.4 2.3–4.1 0.7–3.0–4.1–4.2–3.7–2.6–1.8
- Mexico: –0.9–1.7–1.4–0.9 1.1 1.4 1.6 0.6 0.9 2.2 1.6 1.8 1.8 1.6 1.6
- Romania (Percent of potential GDP): 0.0 0.5 0.7–0.7–2.3–2.3–4.4–7.4–5.1–6.0–4.7–4.5–4.2–4.0–3.5
- Chile (Percent of potential GDP): –0.4–0.4 0.7–0.7–1.6–1.1–1.3–1.7–11.2–4.1–1.8–0.8–0.3 0.0 0.2

Notes relevant to Table A12:
- "Cyclically adjusted primary balance" is defined as the cyclically adjusted balance plus net interest payable/paid (interest expense minus interest revenue) following the World Economic Outlook convention.
- Projections are based on staff assessments of current policies (see “Fiscal Policy Assumptions” in text).
- Country footnotes indicate: 1) data include adjustments beyond the output cycle; 2) Ecuador data reflect net lending/borrowing for the nonfinancial public sector and are subject to historical data revisions; 3) some country numbers are based on nominal GDP series before recent revision and are not comparable to authorities’ numbers; 4) Uruguay data are for the nonfinancial public sector and include specified transfers.

### General Government Revenue (Table A13) — key aggregate patterns
- "Average" row (Percent of GDP): 29.0 28.4 27.3 26.8 27.2 27.7 27.1 25.1 26.1 25.7 25.6 25.6 25.6 25.5 25.5
- Asia (Percent of GDP): 25.4 25.6 26.3 26.1 26.2 26.3 25.6 23.6 24.9 24.1 24.1 24.2 24.3 24.4 24.5
- Europe (Percent of GDP): 34.4 34.4 33.4 33.4 33.8 33.8 35.2 35.2 34.6 35.3 34.4 34.4 34.4 34.5 34.3
- Latin America (Percent of GDP): 29.8 28.9 26.4 26.8 27.2 27.1 27.2 25.9 27.0 27.3 27.3 27.2 27.1 27.1 26.9
- G20 Emerging (Percent of GDP): 28.6 28.2 27.5 27.5 27.7 27.8 27.3 25.4 26.7 25.9 25.9 25.8 25.8 25.9 25.9

Selected country-level revenue sequences (Percent of GDP):
- China: 27.7 28.2 29.0 28.9 29.2 29.0 28.1 25.7 27.0 26.0 26.0 26.1 26.1 26.2 26.3
- India: 19.6 19.1 19.9 20.1 20.0 20.0 19.9 18.3 19.7 18.9 19.1 19.4 19.7 19.9 20.1
- Brazil: 34.5 32.5 28.2 30.7 30.5 30.7 31.5 29.5 31.5 30.9 30.8 30.3 30.1 29.6 29.6
- Russia: 33.5 33.9 31.9 32.9 32.9 33.6 35.5 35.7 35.3 37.0 34.9 34.9 35.0 35.3 35.3
- Mexico: 24.1 23.4 23.5 24.6 24.6 23.5 23.6 24.2 23.3 24.4 23.3 23.5 23.5 23.5 23.6
- Chile (Percent of GDP): 22.6 22.4 22.9 22.7 22.9 24.1 23.7 22.1 25.9 25.4 25.7 25.8 25.5 25.4 25.2
- Romania (Percent of GDP): 31.6 31.7 32.8 28.9 28.9 29.2 28.9 28.8 30.7 30.9 30.4 31.3 32.0 30.9 30.9
- Uruguay (Percent of GDP): 27.2 26.6 26.6 27.1 27.5 28.8 28.3 28.1 28.3 26.5 26.7 27.0 27.0 27.1 27.2

Notes relevant to Table A13:
- Projections are based on staff assessments of current policies (see “Fiscal Policy Assumptions” in text).
- Country footnotes mirror those in Table A12 regarding Ecuador, nominal GDP revisions for some countries, and Uruguay’s change in fiscal coverage.
- For the nonfinancial public sector coverage change and pension transfers affecting Uruguay, the transfers amounted to 1.2 percent of GDP in 2018 and 1.1 percent of GDP in 2019, and are projected to be 0.6 percent of GDP in 2020, 0.2 percent of GDP in 2021, and zero thereafter. See IMF Country Report No. 19/64 for further details.

*Source: IMF staff estimates and projections (Tables A12 and A13, Fiscal Monitor: Fiscal Policy from Pandemic to War, April 2022).*

### 0.6 percent of GDP in 2020, 0.2 percent of GDP in 2021, and zero thereafter. See IMF Country Report No. 19/64 for furthe

### Fiscal Monitor: Key Fiscal and Debt Indicators (Selected Tables, April 2022)

### Emerging Market and Middle-Income Economies — General Government Expenditure (Table A14)
- Average general government expenditure: 30.6, 30.8, 31.4, 31.4, 31.1, 31.2, 31.6, 34.4, 31.4, 31.5, 31.1, 31.0, 30.9, 30.8, 30.7 (Percent of GDP) for 2013–2027 (row labeled "Average" with yearly entries).
- Regional averages (selected):
  - Asia: 27.1, 27.4, 29.4, 29.8, 29.9, 30.6, 31.3, 34.0, 31.5, 31.8, 31.1, 31.0, 31.0, 31.0, 31.0
  - Europe: 36.0, 35.9, 36.1, 36.5, 35.5, 34.9, 35.8, 40.1, 37.2, 39.0, 39.2, 39.0, 38.8, 38.2, 37.7
  - Latin America: 32.9, 33.9, 32.9, 32.8, 32.6, 32.1, 31.3, 34.6, 31.5, 32.0, 31.5, 30.6, 30.1, 29.8, 29.6
- Country highlights (selected annual series, percent of GDP):
  - Argentina: 37.6, 38.9, 41.4, 41.5, 41.1, 38.9, 37.7, 42.1, 38.1, 37.9, 38.0, 38.7, 39.0, 38.8, 38.5
  - Brazil: 37.4, 38.5, 38.5, 39.6, 38.3, 37.7, 37.4, 42.9, 35.9, 38.5, 38.2, 35.9, 35.0, 34.5, 34.1
  - China: 28.6, 28.9, 31.6, 32.3, 32.6, 33.3, 34.2, 36.4, 33.0, 33.7, 33.1, 33.1, 33.1, 33.1, 33.1
  - India: 26.6, 26.2, 27.1, 27.2, 27.2, 26.2, 26.3, 27.4, 31.1, 30.1, 28.8, 28.2, 27.9, 27.7, 27.6
- Source note: Projections based on staff assessments of current policies (“Fiscal Policy Assumptions” in text).

### Emerging Market and Middle-Income Economies — General Government Gross Debt (Table A15)
- Average gross debt (2013–2027 series): 38.3, 40.3, 43.8, 48.4, 50.5, 52.3, 54.6, 64.9, 66.1, 67.4, 69.8, 72.1, 74.2, 75.9, 77.2 (Percent of GDP).
- Regional averages (selected):
  - Asia: 41.3, 43.4, 45.0, 50.0, 52.8, 54.5, 57.6, 68.9, 72.9, 76.5, 79.5, 82.6, 85.4, 87.7, 89.6
  - Latin America: 47.4, 49.6, 53.1, 56.5, 61.1, 67.5, 68.4, 77.8, 72.4, 71.7, 71.9, 71.8, 71.5, 70.1, 70.2
  - Europe: 26.6, 28.9, 31.1, 31.9, 30.0, 29.7, 29.2, 37.9, 36.3, 37.1, 38.6, 40.1, 41.6, 42.9, 43.5
- Country highlights (selected series, percent of GDP):
  - Brazil (note 1): 60.2, 62.3, 72.6, 78.4, 83.6, 85.6, 87.9, 87.9, 93.0, 91.9, 92.8, 93.4, 92.9, 94.9, 94.3
  - China: 37.0, 40.0, 41.5, 48.2, 51.7, 53.8, 57.2, 68.1, 73.3, 77.8, 81.8, 85.8, 88.9, 92.6, 95.4
  - India: 67.7, 67.1, 69.0, 68.9, 69.7, 70.4, 75.1, 90.1, 86.8, 86.9, 86.6, 86.1, 85.3, 84.7, 84.2
  - Sri Lanka: 71.8, 72.2, 78.5, 79.0, 77.9, 84.2, 86.2, 101.2, 107.2, 109.0, 107.5, 109.2, 111.5, 114.2, 117.5
- Notes:
  - 1: “Gross debt” refers to the nonfinancial public sector, excluding Eletrobras and Petrobras and including sovereign debt held on the balance sheet of the central bank.
  - Other country-specific methodological notes provided in the table footnotes.

### Emerging Market and Middle-Income Economies — General Government Net Debt (Table A16)
- Average net debt (2013–2027 series): 23.2, 24.6, 29.0, 34.7, 36.0, 36.7, 38.1, 45.4, 46.2, 44.0, 44.0, 44.4, 44.7, 44.8, 44.6 (Percent of GDP).
- Selected country series (percent of GDP):
  - Brazil (illustrative): 30.5, 32.6, 35.6, 46.1, 51.4, 52.8, 54.7, 62.5, 57.2, 59.0, 61.5, 63.4, 64.9, 66.2, 66.4
  - Poland: 51.7, 45.1, 46.4, 47.6, 44.3, 41.6, 38.4, 45.6, 37.4, 34.4, 33.4, 37.2, 37.5, 37.9, 38.5
  - South Africa: 35.2, 38.1, 41.0, 42.1, 43.8, 46.6, 50.8, 62.6, 63.3, 66.9, 70.8, 74.5, 78.2, 80.8, 86.1
- Notes: Projections based on staff assessments of current policies.

### Low-Income Developing Countries — Overall, Primary, Revenue, Expenditure, and Debt (Tables A17–A22)
- General Government Overall Balance (Table A17) — Average series (2013–2027): –3.4, –3.2, –3.9, –3.8, –3.7, –3.3, –3.5, –5.1, –4.9, –5.2, –4.6, –4.3, –4.2, –4.1, –4.0 (Percent of GDP).
  - Oil Producers average (2013–2027): –3.0, –2.9, –4.6, –5.3, –5.4, –4.1, –4.5, –5.4, –5.8, –5.7, –5.3, –5.5, –5.7, –5.8, –6.0
  - Sub-Saharan Africa average (2013–2027): –3.2, –3.3, –4.1, –4.5, –4.5, –3.9, –4.0, –5.6, –5.5, –5.2, –4.4, –4.2, –4.2, –4.2, –4.2
- General Government Primary Balance (Table A18) — Average series (2013–2027): –2.2, –2.0, –2.5, –2.4, –2.3, –1.7, –1.9, –3.3, –2.9, –3.2, –2.5, –2.1, –1.9, –1.7, –1.6 (Percent of GDP).
- General Government Revenue (Table A19) — Average series (2013–2027): 16.2, 15.9, 14.5, 14.1, 14.5, 15.1, 14.8, 14.1, 14.2, . . ., . . ., . . ., . . ., . . ., . . . (Percent of GDP). (Table shows full country-year breakdowns.)
- General Government Expenditure (Table A20) — Average series (2013–2027): 19.5, 19.1, 18.4, 17.9, 18.2, 18.5, 18.4, 19.2, 19.1, 19.8, 19.2, 19.0, 18.8, 18.7, 18.7 (Percent of GDP).
- General Government Gross Debt (Table A21) — Average series (2013–2027): 31.2, 31.8, 36.1, 39.4, 42.1, 42.4, 43.6, 49.5, 49.8, 50.3, 48.8, 47.8, 47.1, 46.5, 45.9 (Percent of GDP).
  - Notable country-level gross debt series include Sudan: 105.8, 84.4, 93.2, 109.9, 149.5, 186.7, 200.3, 270.4, 184.3, 284.1, 216.9, 188.6, 165.7, 155.1, 147.8 (2013–2027 sequence shown in table).
- General Government Net Debt (Table A22) — Many entries omitted or not available in the table excerpt; selected available series include Cameroon: 15.3, 19.1, 27.6, 30.5, 33.5, 35.9, 39.5, 43.5, 43.0, 37.9, 36.9, 34.7, 32.7, 30.8 (Percent of GDP) and Ethiopia: 38.5, 39.6, 45.9, 47.9, 51.3, 54.8, 50.7, 50.7, 49.1, 45.9, 41.0, 36.4, 34.4, 33.7, 32.6.

### Structural Fiscal Indicators — Advanced Economies (Table A23)
- Advanced economies average (selected indicators):
  - Pension Spending Change, 2021–30: 0.6 (Percent of GDP)
  - Net Present Value of Pension Spending Change, 2021–50: 19.5 (Percent of GDP)
  - Health Care Spending Change, 2021–30: 2.2 (Percent of GDP)
  - Net Present Value of Health Care Spending Change, 2021–50: 81.2 (Percent of GDP)
  - Gross Financing Need, 2022: 24.5 (Percent of GDP)
  - Average Term to Maturity, 2022 (years): 7.2
  - Debt to Average Maturity, 2022: 18.2
  - Projected Interest Rate–Growth Differential, 2022–27 (percent): –2.4
  - Prepandemic Overall Balance, 2012–19: –3.2 (Percent of GDP)
  - Projected Overall Balance, 2021–27: –3.8 (Percent of GDP)
  - Nonresident Holding of General Government Debt, 2021 (percent of total): 30.1
- Country highlights (selected entries, exact values preserved from table):
  - Japan: Pension Spending Change, 2021–30 = –0.9; Net Present Value of Pension Spending Change, 2021–50 = 4.9; Health Care Spending Change, 2021–30 = 1.6; Net Present Value of Health Care Spending Change, 2021–50 = 52.0; Gross Financing Need, 2022 = 52.4; Average Term to Maturity, 2022 = 8.1; Debt to Average Maturity, 2022 = 32.0; Projected Interest Rate–Growth Differential, 2022–27 = –1.1; Prepandemic Overall Balance, 2012–19 = –4.7; Projected Overall Balance, 2021–27 = –4.2; Nonresident Holding of General Government Debt, 2021 = 12.8.
  - United States: Pension Spending Change, 2021–30 = 0.7; Net Present Value of Pension Spending Change, 2021–50 = 17.2; Health Care Spending Change, 2021–30 = 3.5; Net Present Value of Health Care Spending Change, 2021–50 = 130.7; Gross Financing Need, 2022 = 32.0; Average Term to Maturity, 2022 = 5.9; Debt to Average Maturity, 2022 = 22.9; Projected Interest Rate–Growth Differential, 2022–27 = –2.5; Prepandemic Overall Balance, 2012–19 = –5.0; Projected Overall Balance, 2021–27 = –5.6; Nonresident Holding of General Government Debt, 2021 = 25.0.
- Methodological notes provided in table footnotes regarding pension and health spending projections, discount rate assumptions, gross financing need definition, and data sources.

### Structural Fiscal Indicators — Emerging Market and Middle-Income Economies (Table A24)
- Emerging market and middle-income economies average (selected indicators):
  - Pension Spending Change, 2021–30: 1.5
  - Net Present Value of Pension Spending Change, 2021–50: 69.0
  - Health Care Spending Change, 2021–30: 0.6
  - Net Present Value of Health Care Spending Change, 2021–50: 26.8
  - Gross Financing Need, 2022: 13.1
  - Average Term to Maturity, 2022 (years): 7.6
  - Debt to Average Maturity, 2022: 9.4
  - Projected Interest Rate–Growth Differential, 2022–27 (percent): –4.9
  - Prepandemic Overall Balance, 2012–19: –3.2
  - Projected Overall Balance, 2021–27: –5.4
  - Nonresident Holding of General Government Debt, 2021 (percent of total): 13.7
- Selected country entries (exact values preserved):
  - China: Pension Spending Change, 2021–30 = 2.1; Net Present Value of Pension Spending Change, 2021–50 = 95.7; Health Care Spending Change, 2021–30 = 0.7; Net Present Value of Health Care Spending Change, 2021–50 = 29.6; Gross Financing Need, 2022 = . . . ; Average Term to Maturity, 2022 = 7.3; Debt to Average Maturity, 2022 = 9.4; Projected Interest Rate–Growth Differential, 2022–27 = –5.7; Prepandemic Overall Balance, 2012–19 = –2.7; Projected Overall Balance, 2021–27 = –6.9; Nonresident Holding of General Government Debt, 2021 = 3.5.
  - India: Pension Spending Change, 2021–30 = 0.6; Net Present Value = 28.7; Health Care Spending Change, 2021–30 = 0.2; Net Present Value of Health Care Change, 2021–50 = 7.4; Gross Financing Need, 2022 = 14.3; Average Term to Maturity, 2022 = 10.6; Debt to Average Maturity, 2022 = 8.5; Projected Interest Rate–Growth Differential, 2022–27 = –4.2; Prepandemic Overall Balance, 2012–19 = –7.0; Projected Overall Balance, 2021–27 = –8.7; Nonresident Holding = 4.8.
- Notes: Table includes country-specific values and methodological footnotes on projections, discount rates, and other assumptions.

### Structural Fiscal Indicators — Low-Income Developing Countries (Table A25)
- Low-income developing countries average (selected indicators):
  - Pension Spending Change, 2021–30: 0.5
  - Net Present Value of Pension Spending Change, 2021–50: 21.9
  - Health Care Spending Change, 2021–30: 0.2
  - Net Present Value of Health Care Spending Change, 2021–50: 7.6
  - Average Term to Maturity, 2022 (years): 7.0
  - Debt to Average Maturity, 2022: 8.1
  - Projected Interest Rate–Growth Differential, 2022–27 (percent): –6.9
  - Pre–Pandemic Overall Balance, 2012–19: –3.4
  - Projected Overall Balance, 2021–27: –4.5
  - Nonresident Holding of General Government Debt, 2021 (percent of total): 46.7
- Selected country entries (exact values preserved):
  - Bangladesh: Pension Spending Change, 2021–30 = 0.2; Net Present Value = 12.9; Health Care Spending Change, 2021–30 = 0.1; Net Present Value of Health Care Spending Change, 2021–50 = 2.9; Average Term to Maturity, 2022 = 5.3; Debt to Average Maturity, 2022 = 7.4; Projected Interest Rate–Growth Differential, 2022–27 = –5.0; Pre–Pandemic Overall Balance, 2012–19 = –4.2; Projected Overall Balance, 2021–27 = –5.2; Nonresident Holding = 36.6.
  - Kenya: Pension Spending Change, 2021–30 = 0.4; Net Present Value = 21.8; Health Care Spending Change, 2021–30 = 0.3; Net Present Value = 14.0; Average Term to Maturity, 2022 = 8.3; Debt to Average Maturity, 2022 = 8.1; Projected Interest Rate–Growth Differential, 2022–27 = –3.0; Pre–Pandemic Overall Balance, 2012–19 = –6.5; Projected Overall Balance, 2021–27 = –5.3; Nonresident Holding = 47.9.
- Notes: Table footnotes specify projection methods, discount rates, and data sources; many country-specific entries and coverage differences are noted in the original tables.

*Source: IMF staff estimates and projections (Fiscal Monitor: Fiscal Policy from Pandemic to War, April 2022).

### Conclusion and Risk Assessment April 2012, Chapter 7

### Conclusion and Risk Assessment April 2012, Chapter 7

### Selected Topics Index (excerpt)
- The source lists numerous thematic entries across fiscal topics, including:
  - IX. Government Debt — entries such as "Strengthening the Credibility of Public Finances October 2021, Chapter 2" and "Debt Ratios Are Still on the Rise, but Peaks Are within Sight April 2012, Chapter 2".
  - X. Growth — entries such as "IDEAS to Respond to Weaker Growth April 2020, Chapter 2" and "Fiscal Policy for a Changing Global Economy April 2019, Chapter 1".
  - XI. Inflation — "Fiscal Policy from Pandemic to War April 2022, Chapter 1" and "Inflation and Fiscal Nexus: Empirical Findings April 2022, Online Annex 1.3".
  - XII. Innovation, Entrepreneurship, Research, Development, and Investment — entries including "Public Investment for the Recovery October 2020, Chapter 2" and "Digital Government April 2018, Chapter 2".
  - XIII. Interest Rates — "The Weakened Relation between Sovereign Spreads and Debt October 2021, Online Annex 2.2" and related historical boxes on interest rate–growth differentials.
  - XIV. Low-Income Countries — "Fiscal Developments in Countries Participating in the Debt Suspension Initiative October 2021, Box 1.2" and other entries on digitalization and fiscal implications.
  - XV. Policy and Reform — entries including "Coordinating Taxes across Borders April 2022, Chapter 2" and "Anchoring Medium-Term Fiscal Credibility: The Second Generation of Fiscal Rules April 2012, Chapter 6".
  - XVI. Poverty and Inequality — "Fiscal Policy from Pandemic to War April 2022, Chapter 1" and "Social Protection and Poverty During the Pandemic April 2022, Box 1.1".
  - XVII–XXV. Additional topic groupings covering Private Debt, Privatization, Revenue, Social Expenditures, Stabilization, Stimulus, Subsidies, Sustainability and Risk Management, and Taxation with many dated chapter and box references.

### IMF Executive Board Discussion of the Outlook — April 11, 2022 (Chair’s concluding remarks)
Findings and risks:
- The war in Ukraine has led to a costly humanitarian crisis, with economic and financial repercussions and spillovers—through commodity markets, confidence, trade, and financial channels—that have prompted a downgrade to the global economic outlook and increased inflationary pressures at a time when the global economy has not yet recovered from the COVID-19 crisis.
- The sharp increase in uncertainty could make economic projections especially volatile.
- Emerging risks further tilting the balance to the downside include:
  - an intensification of the war,
  - further sanctions on Russia,
  - fragmentation in financial and trade markets,
  - a sharper-than-expected slowdown in China due to COVID-19 outbreaks,
  - continued risk of new, more virulent COVID-19 strains.
- The war in Ukraine has increased the likelihood of food shortages and wider social tensions given higher food and energy prices.

Policy priorities and recommendations:
- Policy priorities differ across countries, reflecting local circumstances and differences in trade and financial exposures.
- For countries with tighter budget constraints, fiscal support should focus on priority areas and target the most vulnerable.
- In countries where economic growth is strong and inflation is elevated, fiscal policy should phase out pandemic-related exceptional support, moving toward normalization.
- A sound and credible medium-term fiscal framework—with spending prioritization and measures to raise revenues—can help manage urgent needs while ensuring debt sustainability.
- Short-term measures to mitigate high food and energy prices should not undermine actions to ensure greater resilience through investment in health, food, and cleaner energy sources.
- Monetary authorities should act decisively to prevent inflationary pressures from becoming entrenched and avoid a de-anchoring of inflation expectations; central banks in many advanced and emerging market economies need to continue tightening the monetary policy stance to bring inflation credibly back to target and preserve hard-built policy credibility.
- Transparent, data-driven, and clearly communicated monetary policy is critical to avoid financial instability.
- Emerging and developing economies should be ready to use all available tools, including foreign exchange interventions and capital flow management measures, when needed and in line with the Fund’s Institutional View on the Liberalization and Management of Capital Flows and without substituting for exchange rate flexibility and warranted macroeconomic adjustments.

Financial stability and regulatory guidance:
- The war in Ukraine will test the resiliency of the financial system; financial stability risks have risen along many dimensions while global financial conditions have tightened significantly.
- In emerging markets where the sovereign-bank nexus could pose vulnerabilities, it should be closely monitored.
- Noted risks include fragmentation of capital markets and payment systems, the creation of blocks of central bank digital currencies, more widespread use of crypto assets, and more frequent cyberattacks.
- Recommended actions:
  - Tighten selected macroprudential tools to tackle pockets of elevated vulnerabilities while avoiding procyclicality and a disorderly tightening of financial conditions.
  - Develop comprehensive global standards and a multifaceted strategy for crypto assets and strengthen oversight of fintech firms and decentralized finance platforms.

Multilateral and structural priorities:
- Strong multilateral cooperation is essential to respond to humanitarian crises, safeguard global liquidity, manage debt distress, ensure food security, mitigate and adapt to climate change, and end the pandemic.
- The Fund and other multilateral institutions should stand ready to provide financial support given higher volatility, increased spending, and tightening financial conditions.
- Prompt and orderly debt restructuring, particularly by improving the G20 Common Framework, will be necessary where liquidity support is insufficient.
- Heightened urgency to advance the green economic transformation and to implement the COP26 roadmap while addressing energy security concerns.
- International cooperation in corporate taxation and carbon pricing could help mobilize resources for necessary investments and reduce inequality.
- Prompt, equitable, and wider access to vaccinations, testing, and treatments remains a key priority to address the persistence of the pandemic.
- Directors called for a peaceful resolution of the war in Ukraine, an end to the resulting humanitarian crisis, and a return to the rules-based international order.

Additional administrative note:
- Mention code Spring 22 to receive a 25% discount for orders placed online at bookstore.IMF.org.

*Italic line: Source: IMF — text excerpt including Selected Topics index and Chair’s concluding remarks from the Executive Board discussion of the Fiscal Monitor, Global Financial Stability Report, and World Economic Outlook on April 11, 2022.*

### CHAPTER 1

### CHAPTER 1

### Chapter title
- Fiscal Policy from Pandemic to War

*Source: text - CHAPTER 1*

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_Source: https://www.imf.org/-/media/files/publications/fiscal-monitor/2022/april/english/text.pdf_