Selected Issues Papers
IMF Selected Issues Papers are prepared by IMF staff as background documentation for periodic consultations with member countries.
2023
March 2, 2023
Fiscal Federalism in Belgium: Challenges in Restoring Fiscal Sustainability Belgium: Belgium
Description: Fiscal decentralization in Belgium progressed substantially in 2015-19. However, as decentralization of expenditure responsibilities continued to outpace decentralization of revenue authority, vertical fiscal gaps and greater reliance on transfers from shared resources may have reduced spending discipline. Consecutive shocks (pandemic, energy prices) have worsened the fiscal positions of all levels of government, requiring urgent and concerted effort to improve fiscal and debt sustainability. Fostering better fiscal policy coordination across all levels of government would improve the efficiency of Belgium’s decentralized fiscal framework. We recommend that fiscal adjustment at the subnational levels should be a part of the general government fiscal consolidation plan, with strict spending limits applying; integrating systematic spending reviews in the budgetary process; and adopting a more strategic, multi-annual fiscal framework to support adjustment. Implementing the 2013 Cooperation Arrangement—intended to provide fiscal rules to govern and coordinate public finances at all levels—is important. Also, the cost of overborrowing at the regional level should be fully internalized; recalibration of transfers could be considered; and some flexibility should be retained in the pace and scope of further decentralization. Finally, there is scope to improve the integration of fiscal sustainability objectives in federal and subnational structural reforms.
March 2, 2023
Fiscal Policy Options to Accelerate Emissions Reductions in Belgium Belgium: Belgium
Description: Belgium’s current policies fall short of achieving its climate targets and promoting emissions reductions at limited economic costs. We recommend that domestic carbon pricing form the centerpiece of an emissions reduction package, as pricing promotes mitigation at the lowest economic cost, can be phased in as international energy prices fall, and generates revenue to compensate vulnerable households and reduce taxes on productive activities. Sectoral policies, such as subsidy-tax schemes to promote low emissions vehicles, should reinforce carbon pricing and regional efforts, while the social protection system can be made more efficient and environmentally friendly by switching from energy subsidies to income-based support. Belgium should also promote dialogue at the EU-level to harmonize ETS prices and include all sectors under a single trading scheme.
February 28, 2023
Spending Efficiency and Reforms: France
Description: To rebuild fiscal buffers after large fiscal responses to successive shocks over 2020-22, France will need to reverse the trend spending increase observed over the last three decades through structural spending reforms. This paper identifies areas where scope for savings or efficiency gains exist based on an evaluation of the level and efficiency of public spending in France relative to European peers, using benchmarking analysis and stochastic frontier analysis to derive efficiency frontiers. Reforming social protection, health, education, and civil service, and rationalizing tax expenditures should preserve or improve outcomes while generating savings that would help meet medium-term adjustment needs.
February 28, 2023
Structural Transitions to Electric Vehicle Production: Czech Republic
Description: Sustaining the impressive convergence gains allowed by the Czech automotive sector has become challenging due to its comparatively lower value added, lower investments in research and development, and lower skills in the labor market. Using a structural model of global value chains, the paper examines policies to smooth the transition to the production of electric vehicles in Czechia. The analysis explores the impacts of increasing labor productivity, boosting production capabilities, and moving up the global value chain. These policies were found to have a relatively lower impact when they shift specialization towards lower value-added stages of production.
February 28, 2023
Labor Productivity Dynamics in Spain: A Firm-Level Perspective: Spain
Description: This paper uses firm-level data that covers over 1.2 million Spanish firms during the period of 2003-2019 to provide an updated assessment of the drivers of labor productivity in the Spanish economy, focusing on both TFP and firm investment. The empirical analysis shows significant differences in production constraints in both the capital market and the labor market, across firm size and age. This paper also includes a review of Spain’s ambitious reform commitments under the Recovery, Transformation and Resilience Plan and concludes with recommendations for further action.
February 28, 2023
Labor Market Implications for Green Investments and Carbon Pricing in Spain: Spain
Description: Labor Market Implications for Green Investments and Carbon Pricing in Spain green policies; input-output matrix; employment; occupations; skills ABSTRACT: We provide a tractable framework for assessing the labor market impact of policies that support the green transition of the Spanish economy, taking into account input-output linkages. We present illustrative examples that quantify changes in sectoral employment, occupations and skills stemming from two different green policies: (i) the announced green investments in the recovery plan; and (ii) an increase in carbon pricing and an expansion of the EU Emission Trading System (ETS). Our analysis shows that the labor market impact of these two policies is net positive, although the results depend on the design of the green policies, particularly on the use of the proceeds from the increase in carbon pricing. Strengthening active labor market policies, with a focus on training, and complementing them with education policies such as the expansion of vocational training, would facilitate the transition of workers from shrinking to expanding sectors.
February 27, 2023
The Effects of Climate and Conflict Shocks on Household Welfare: Niger
Description: As livelihoods in Niger still depend to a large extent on agricultural production, shocks related to climate change and insecurity present a threat for the country’s development path and are the main sources of vulnerability for the population in rural areas. This paper uses data from the latest household living standard survey to quantify the effects and interactions of these shocks on household welfare before proposing policy recommendations to enhance the resilience of households and the economy more generally. Our results show that when rainfall decreases by one standard deviation, per capita income falls by 11 percent. Furthermore, the impact of shocks on households depends on their adaptive capacity, which includes sufficient agricultural capital and income diversification. Without concrete adaptation measures, vulnerability to climate change is expected to increase in Niger, and human capital accumulation in poor household is also expected to deteriorate and could lead to a poverty trap.
February 27, 2023
Financial Inclusion in Niger: Challenges and Opportunities: Niger
Description: Financial inclusion can increase economic growth and productivity and reduce poverty and inequality by helping people and firms—particularly SMEs—to save and invest, smooth consumption, and better manage financial risks. This paper highlights Niger’s lag compared to other WAEMU countries in terms of access to and use of formal financial services, including for women and youth, and underscores key demand and supply side challenges to financial inclusion as well as structural impediments. It lays out key priorities for Niger to harness the potential of greater financial inclusion to support the country’s development agenda, including efforts to tackle low financial literacy, promote digitization, and address informality.
February 27, 2023
Fostering Export Diversification in Niger: Niger
Description: This selected issue paper investigates the drivers of diversification and explores the potential for fostering diversification in Niger with a focus on horizontal policies. The empirical results from panel regressions indicate that reforms to enhance human capital and the quality of infrastructure, to promote digitalization, to remove barriers to trade and improve governance are likely to yield the largest gains in terms of diversification for Niger.
February 27, 2023
Macroeconomic Gains from Closing Gender Educational Gaps in Niger: Niger
Description: This paper explores the state of gender equality and education attainment of girls in Niger. It also estimates the macroeconomic gains from reducing gaps in education between boys and girls using a micro-founded general equilibrium model. The analysis shows that Niger has made some progress toward higher educational attainment for girls, but the country still lags far behind other sub-Saharan African countries. The results from the general equilibrium model suggest that closing the gender gaps in education would boost female labor participation, increase income earned by women and improve fiscal outcomes. More importantly, closing the gender gap in years of schooling in each income percentile would boost long-term GDP by 11 percent. These significant economic gains from investing in girls’ education will contribute to the achievements of the strategic goals defined under the Programme de Développement Economique et Social (PDES) 2022-26.