Selected Issues Papers
IMF Selected Issues Papers are prepared by IMF staff as background documentation for periodic consultations with member countries.
2025
June 19, 2025
Strengthening The Rules-Based Fiscal Framework in Papua New Guinea: Papua New Guinea
Description: Papua New Guinea’s public debt has increased significantly in recent years, leading to a high risk of debt distress and exposing significant gaps in the existing fiscal setting. This paper proposes to strengthen the authorities’ fiscal framework by introducing a clear public debt anchor and a primary balance rule. Specifically, we consider setting the medium-term debt anchor at between 30 and 40 percent of GDP to ensure that the debt limit of 60 percent is not breached under most scenarios, and using the primary balance as an operational policy instrument to facilitate the convergence of public debt to its anchor.
June 18, 2025
Kyrgyz Republic: Fiscal Risks from State-owned Enterprises
Description: State-owned enterprises (SOEs) in the Kyrgyz Republic play a significant role in the economy but also present potential fiscal risks. This paper assesses these risks through both aggregate and firm-level lenses. At the aggregate level, the total amount of liabilities of largest SOEs liabilities amounted to approximately 25 percent of GDP, raising concerns about contingent fiscal liabilities. The firm-level assessment based on key financial indicators - profitability, solvency, and liquidity- confirms vulnerabilities, particularly among large SOEs in the energy sector, where low profitability largely reflects tariffs set below cost-recovery levels. These findings underscore the importance of strengthening SOE oversight, financial transparency, and advancing reforms to mitigate fiscal risks.
June 18, 2025
Potential Output in the Kyrgyz Republic: Kyrgyz Republic
Description: This paper revisits the potential output of the Kyrgyz Republic considering recent structural shifts and external shocks, including the pandemic and the regional conflict. Utilizing a suite of methodologies – production function, state-space models, and statistical filters – it estimates potential output growth at 5.3 percent, up from around 4.4 percent prior to the pandemic. This increase is primarily driven by capital accumulation and labor force expansion. However, total factor productivity remains below historical averages. The persistently positive output gap points to overheating risks, underscoring the need for counter-cyclical policies and structural reforms.
June 18, 2025
Labor Market Challenges and Policy Reforms in the Kyrgyz Republic: Kyrgyz Republic
Description: This SIP reviews the labor market constraints to growth and development in the Kyrgyz Republic, including gender-specific constraints. It is motivated by the high annual population growth rate of 2 percent, which implies 50,000 new labor market entrants per year. The review canvasses broadly recent additions to the relevant economic literature and databases. The SIP finds that significant informality, low worker productivity, a skills mismatch, and the gender gap in labor participation undermine improvements in, and the efficient allocation of, the labor force. The paper suggests a sharper focus of more flexible labor market policies, a more cost-effective education system, and better social safety nets.
June 17, 2025
Revamping Fiscal Decentralization to Secure Peru’s Position as a Leading Critical Mineral Exporter: Peru
Description: Peru’s mining wealth holds the promise to substantially accelerate potential growth. However, many mining projects have been stalled for several years due to conflicts with local communities that feel excluded from the benefits. Although local governments receive nearly 2 percent of GDP in natural resource revenues per year and comprise over 40 percent of public investment, poor execution and institutional challenges limit their impact. To secure the country’s future as a critical mineral exporter, Peru needs to amend its fiscal decentralization framework to ensure that mining dividends translate into greater development for all citizens. Efforts should focus on improving the distribution of resource-based revenues, replacing discretionary transfers with rule-based transfers, strengthening central government oversight, and increasing capacity and coordination at the subnational level to support public investment efficiency.
June 13, 2025
Exploring the Determinants of Early Retirement in Spain: Spain
Description: Increased longevity and population aging pose growing fiscal challenges for Spain, which can be mitigated by encouraging greater labor force participation among older workers. Over the past decade, increases in both the minimum and standard pensionable age have led to longer average careers, resulting in significant aggregate employment rate gains. However, a considerable proportion of workers still retire early or exit the labor force several years before reaching retirement age. Therefore, policy action across a broader range of areas is needed to foster further employment growth, by addressing critical issues and constraints to labor force participation among workers aged 55 and above. These include deteriorating health conditions, the need for flexibility in work arrangements, other household-related time commitments—such as caregiving for family members, maintaining in-demand skills, and the financial (dis)incentives embedded in unemployment support programs.
June 13, 2025
Policies to Achieve Spain’s Climate Objectives: Spain
Description: Spain aims to cut greenhouse gas emissions, which implies further 30 percent cut from 2023 levels by 2030, requiring new measures beyond current efforts. Emission intensity varies widely across Spanish firms, offering potential for reductions by incentivizing laggards to match less-polluting peers. Relying mainly on public spending, like subsidies or investments, would be costly and insufficient. Carbon pricing is the most effective, cost-efficient, and fiscally attractive option, especially given Spain's limited fiscal space. The ongoing EU-ETS expansion could be complemented with domestic actions to enhance carbon pricing's role.
June 13, 2025
Spain’s Productivity Gap Vis-à-Vis Europe and the United States: Diagnosis and Remedies
Description: Spain's GDP per capita gap with highest-income euro area economies and the US is mainly due to a productivity shortfall. Spanish tech firms lag in productivity and innovation, partly due to weaker R&D investment. Beyond leading firms, there's a broader lack of dynamism; firms enter small and fail to scale up, resulting in fewer high-growth firms compared to Europe and the US. This scarcity of "gazelles" is linked to limited venture capital, human capital, and regulatory obstacles. Policy remedies include enhancing market integration, improving access to long-term risk capital, and boosting the innovation ecosystem and higher education quality.
June 13, 2025
Post-Pandemic Investment in Spain: Assessing the Sluggish Recovery
Description: This paper examines Spain’s investment performance five years after the COVID-19 pandemic. As of 2024, investment had only returned to pre-pandemic levels and remained below historical fundamentals and euro area peers, particularly in transport equipment and other construction. Macroeconomic analysis identifies elevated economic policy uncertainty as a factor holding back investment. Moreover, firm-level data show that investment among small and younger to middle-aged Spanish firms is less responsive to profitability than in comparable firms in larger euro area economies, further suggesting that uncertainty is weighing on investment decisions. For younger and middle-aged firms, high leverage during the pandemic also points to binding financial constraints.
June 10, 2025
Domestic Revenue Mobilization in WAEMU: WAEMU
Description: Domestic Revenue Mobilization (DRM) is essential for financing economic and social development and ensuring debt sustainability in WAEMU, particularly in light of rising interest, high security spending, and the prospective reduction in foreign aid. While DRM has generally improved over the past two decades, it remains below the former target and exhibits significant disparities across countries, affected by structural challenges – such as narrow tax bases, limited enforcement capacity, and widespread informality. Strengthening tax policy and revenue administration (by streamlining tax systems, rationalizing exemptions, and improving compliance), supported by enhanced regional oversight and cooperation, is critical to ensuring sustainable revenue mobilization.