Selected Issues Papers
IMF Selected Issues Papers are prepared by IMF staff as background documentation for periodic consultations with member countries.
2023
June 26, 2023
Public Procurement in South Africa: Issues and Reform Options
Description: The 2015 Supply Chain Management Review lays out a sound agenda for procurement reform. The ongoing work on a new procurement bill and regulations are an important opportunity to spearhead procurement reform and step-up implementation. Several important reform aspects worth prioritizing are the simplification and standardization of aprocurement procedures, the standardization of transparency requirements through the adoption of the Open Contracting Data Standards, transitioning to a new e-procurement system that is linked to the government’s integrated financial management information system (IFMIS) and other systems, making preferential procurement more cost effective and goal oriented, and strengthening staff capacity to carry out procurement. Opportunities to centralize procurement should be further explored to leverage and develop limited capacity.
June 26, 2023
South Africa Carbon Pricing and Climate Mitigation Policy
Description: Meeting South Africa’s ambitious climate objectives will require a comprehensive strategy that includes a more effective use of carbon pricing policy, reducing inefficient government subsidies that have delayed the green transition, well-targeted support to affected industries and households, and other green financial and sectoral measures. Implemented well, the mitigation policy package would promote low-carbon investments, raise government revenues, and support economic growth.
June 19, 2023
Inflation Dynamics in the West African Economic and Monetary Union: WAEMU
Description: This paper analyzes recent inflation developments in the WAEMU. As in all inflation spikes in the past two decades, food is the main driver of inflation. The contribution from energy prices is also increasing, while inflation contagion effects are still limited to a few sectors. The share of professionals that believe that inflation will continue above the target within the one-year horizon is at high levels compared to 2021. Based on projections from two models, the chapter also evaluates the appropriate monetary policy responses to the recent inflationary pressures. The results suggest that inflation is expected to converge to its target range within 24 months given the reduction of exogenous shocks weighing-in on food and energy prices, the exhaustion of base effects as well as a reduction in supply and demand imbalances. However, numerous external and internal factors affect inflation prospects and should be carefully monitored, given the pronounced uncertainty surrounding geopolitical and economic developments, and further monetary policy tighten would be necessary unless downside risks to forecasts for baseline inflation and external buffers improve.
June 13, 2023
The Link Between Social Grant and Employment in South Africa
Description: The literature has analyzed the link between social grants, means-tested and unconditional on employment, and employment in South Africa. The country’s social grant expenditure is relatively large amid persistently high unemployment. This study uses a large panel household survey spanning a decade to find that old-age and disability grant recipients are less in employment as intended by the social program, consistent with the literature. The study adds to the literature by showing that, among “indirect recipients,” younger members typically have lower employment prospects than other indirect recipients. There could be various explanation for this finding, including that the youth are more discouraged from seeking jobs, face larger constraints in the labor market, or have less job opportunities.
June 5, 2023
Food Insecurity and Climate Shocks in Madagascar: Republic of Madagascar
Description: Food insecurity dramatically increased in Madagascar over the last 10 years, hampering human development. Using most recent data and surveys conducted by UN Agencies and local authorities, this paper analyzes the root causes of food insecurity in Madagascar related to demographic vulnerabilities, multidimensional poverty, lack of education, as well as structural weaknesses in the food value chain and the lack of basic infrastructure, such as irrigation and transportation, that hamper agricultural activity development. Moreover, Madagascar is exposed to a large variety of climate shocks that climate change will likely exacerbate. This paper formulates country specific macroeconomic and operational policy recommendations in collaboration with the World Food Program to reduce food insecurity, which include i) measures to improve the emergency response and preparedness, ii) policies to address structural food insecurity, by improving the food chain and addressing challenges posed by climate shocks, and iii) measures to improve Green PFM and climate related public investment management to invest in long-term resilience and mobilize external financing.
June 5, 2023
Social Spending and Outcomes in Madagascar: Republic of Madagascar
Description: The paper examines Madagascar's education, health, and social assistance spending and outcomes. Government spending on education is relatively low compared to peers, and the quality of education has deteriorated. The paper recommends allocating more resources to the sector, ensuring transparent and merit-based teacher recruitment mechanisms, and strengthening teacher training and incentives. Health spending is also low, and the health system faces challenges in malnutrition, immunization, and service delivery. Additional domestic resources and large-scale structural reforms are needed. Social safety net programs have limited coverage and low spending, and expanding them should be a top priority to reduce poverty and support vulnerable populations.
June 5, 2023
Informality and Growth in Madagascar: Republic of Madagascar
Description: This chapter investigates the link between informality and growth in Madagascar and aims for a better understanding of the informal sector. It provides an analysis of the characteristics of informal production units and informal employment. Findings suggest that informality is a key feature of economic activity in Madagascar, and that informal production units are the main driver of employment with a deep concentration around self-employment. Overall, informality is associated with a lack of awareness of administrative procedures and the complexity and cost of tax and regulatory measures. The informal sector’s Total Factor Productivity (TFP) growth is more stable and higher on average than the formal sector TFP.
May 18, 2023
JGB Yield Curve and Macro-Financial Stability: ow Would a Steeper JGB Yield Curve Affect Bank Profitability? Japan
Description: Given that there is exceptionally high uncertainty around the domestic inflation outlook, allowing for greater flexibility in long-term Japanese Government Bond (JGB) yields by the Bank of Japan (BoJ) could be considered going forward. Against this background, this study empirically finds that a steeper JGB yield curve helps improve banks’ profitability, especially after a year lag, and the overall impact hinges on macroeconomic and financial market responses. A steeper JGB yield curve could also have spillovers on global yields. Financial sector policies to mitigate short-term vulnerabilities in case the JGB yield curve steepens could be considered, including by further strengthening engagement with financial institutions with relatively high exposure to interest rate movements, to better harness the benefits in the medium term.
May 18, 2023
Structural Barriers to Wage Income Growth in Japan: Japan
Description: Stagnant income growth has limited Japan’s growth potential and reflation efforts. This paper dissects the wage dynamics of different labor groups and identifies the structural barriers to income growth. Although average income growth has been weak due to the rise of part-time workers and their declining hours, real wages per hour have risen across all labor groups, with the most gain seen among part-time and female workers. The weak income growth is largely driven by structural factors, including disincentives for second earners in the social security system, pension policies, and more broadly the dual labor market structure. Policies to address these structural barriers are key to boost income growth in Japan.
May 18, 2023
The Financial Impact of Carbon Taxation on Corporates: Japan
Description: Japan’s commitment to achieve net zero emissions by 2050 will likely require substantial carbon pricing. Corporates appear to be able to absorb a sharp increase in carbon taxes on average, but there is a substantial weak tail of firms that could face financial stress. The analysis underscores the need to align the private sector and public policies with Japan’s climate targets to ensure a smooth transition to net zero.