Speech

Developing Asia: Achieving Inclusive and Sustainable Growth with Sound Fiscal Management

February 12, 2020

AS PREPARED FOR DELIVERY

Honorable Ministers and Governors, Vice Minister Takeuchi, colleagues from JICA, ladies and gentlemen: A very good morning to you all and welcome to the Fifth IMF-JICA Conference.

It is one in a series of joint IMF-JICA conferences that we organized over the past several years.

At the outset I would like to extend the IMF’s great appreciation to JICA and to the Japanese authorities for making this conference possible through their generous financing and these conference facilities.

I also want to thank all officials, presenters and others for taking the time to prepare for, and join, this conference despite the ongoing coronavirus outbreak.

Today’s conference will provide us with an excellent opportunity to share lessons on how to achieve inclusive and sustainable growth while striking the right balance between—on the one hand, the pressing investment needs for development and, on the other, sustainable debt in developing Asia.

The conference rightly focuses on the importance of prudent public financial management practices, further revenue mobilization and improved debt management practices.

The Sustainable Development Goals, or SDGs, provide a useful framework for policymakers to assess countries’ progress in fostering inclusive and sustainable growth.

Investment in human, social, and physical capital are at the core of achieving the SDGs and thereby inclusive and sustainable growth—I am thinking here, for example, of investment in education, health, roads, electricity, and water and sanitation.

Our studies show that the additional spending required for meaningful progress on SDGs in these areas by 2030 is quite large generally. Developing countries’ additional spending every year reaches an estimated 15 percentage points of their combined GDP in 2030.

Not surprisingly, this figure is much greater than for emerging market countries—at just over 4 percentage points of their GDP.

And when we look specifically at emerging and developing Asian countries, we see these countries will require additional annual spending reaching 10 percentage points of their GDP in 2030. Judging by these figures, it is clear that countries cannot borrow their way to achieving the SDGs.

So, how can policymakers balance large financing needs to meet the SDGs and support inclusive growth, and at the same time safeguard debt sustainability in developing Asia?

We are all collectively looking for answers to this question in this conference but let me share few thoughts with you.

First, countries need to generate more domestic tax revenue.

This could be a natural outcome of structural reforms needed to achieve SDGs such as strengthening economic management, improving governance and combatting corruption, fostering transparency and accountability, and fostering a sound and stable business environment.

Second, countries need to spend better, and in particular make government spending more efficient.

Our estimates suggest that, on average, over one-third of government investment is lost due to inefficiency.

For example, resources budgeted to build 10 kilometers of roads will only build about 7 kilometers .

Therefore, public financial management reforms that support improved spending efficiency and prudent management of public resources are crucial to secure these savings.

Third, there is a need to strengthen public debt management. Countries should boost debt transparency by providing accurate, comprehensive, and timely data.

This responsibility falls on both creditors and debtors, and it will help increase trust with investors, support domestic capital markets, and reduce debt service costs.

And finally, domestic efforts are simply not enough to cover estimated additional spending needs to achieve the SDGs, particularly in low income developing countries.

This effort will require support from all stakeholders —including the private sector, donors, philanthropists, and international financial institutions.

As I mentioned already, these are some of the highlights from our research but not a complete list.

We hope that this conference will be an interactive lively peer-to-peer discussion covering these issues, and other important ones as well. We want to take advantage of the knowledge and different points of view of all the policymakers and practitioners in the room.

In closing, I would again like to welcome all of you to this important conference and express my hope that you contribute by sharing your country experience and expertise during the discussions today.

Thank you very much.