IMF Fiscal Affairs e-Newsletter

May 2011
Fiscal Affairs Department (FAD) of the International Monetary Fund

Fiscal Monitor: Shifting Gears—Tackling Challenges on the Road to Fiscal Adjustment


The April 2011 issue of the IMF’s Fiscal Monitor highlights that many advanced countries, with the important exception of the United States and Japan, have taken important measures toward fiscal consolidation, but fiscal sustainability risks remain elevated in most advanced economies, with rising debt ratios and financing needs at historical highs. The fiscal outlook for emerging economies is more favorable, but this reflects in part the tail winds of high asset and commodity prices, low interest rates, and strong capital inflows. Low-income countries will have to balance spending priorities—in the context of higher food and energy prices—with fiscal sustainability.

Cover of Fiscal Monitor

Revenue Mobilization and Development Conferences (Washington, D.C. and Nairobi)

More than 200 participants from 90 countries gathered in Washington, D.C. (April 17-19) at the IMF conference on Revenue Mobilization and Development, which was opened by IMF Managing Director, Mr. Strauss-Khan. This addressed the key challenge that developing countries face in not just raising more revenue, but doing so in ways that are more efficient, fairer, and better promote good governance. Participants comprised ministers of finance, tax commissioners, senior tax policy officials, CSOs, donors, academics, and representatives of international organizations. This followed an earlier IMF conference on Revenue Mobilization in sub-Saharan Africa in Nairobi on March 21-22, hosted by the Kenyan government and with the participation of senior tax officials from all sub-Saharan countries. These major conferences marked the launch of two trust funds to support Fund's technical assistance on taxation. The policy dialogue responds to the G20's recent request to international organizations in the area of domestic resource mobilization. Both conferences drew on the recent FAD Board paper on the subject.

FAD In The News

The April issue of the Fiscal Monitor was widely covered by news agencies and media, including among others Dow Jones, Bloomberg, Xinhua, BBC, AFP, AGI, Reuters, Globe and Mail, El Pais, ABC (Spain), EFE, ANSA, Le Figaro, Le Parisien, and Financial Times.


Carlo Cottarelli’s blog The Long and the Short of It—Government Debt Plans in 2011 and Beyond, was echoed by other blogs and on-line services: Huffington Post, Roubini’s Global Economics, The Economic Populist, Finance Blog, Bullfax, Hedgehogs, The Forex Blog, Lockwood, Talk Finance, and Profit.


Bloomberg and Reuters broadcast interviews with Carlo Cottarelli on analyses contained in the Fiscal Monitor and U.S. fiscal policy.

Fiscal Forum

Tokyo Seminar

The Second Fiscal Forum took place on April 14 at IMF headquarters in Washington, D.C.  The forum discussed fiscal adjustment and risks and was opened by IMF Managing Director Mr. Dominique Strauss-Kahn. The focus was on the urgent need for fiscal consolidation in key advanced economies, socially-inclusive adjustment, structural and institutional reforms to strengthen fiscal frameworks, and fiscal risks. Professor Larry Summers (Harvard and former US Treasury secretary) delivered the keynote speech and the event concluded with a lively panel discussion, moderated by Ms. Zanny Minton Beddoes (The Economist). The panel included Jaime Caruana (BIS), Carlo Cottarelli (FAD Director), Kemal Dervis (Brookings), Doug Elmendorf (US CBO), and Simon Johnson (MIT). The Panel emphasized the risks posed by mounting debt levels in advanced countries, policy pressures arising from an asymmetric global recovery, and as-yet unresolved fiscal risks from large, undercapitalized financial institutions.

Asian Regional Seminar:  Promoting Fiscal Sustainability by Improving Public Spending

In March 2011, the Malaysian Ministry of Finance and FAD jointly organized in Kuala Lumpur an Asian Regional Seminar on Promoting Fiscal Sustainability through Improving the Efficiency and Effectiveness of Public Spending. More than 60 senior budget officials representing 22 countries attended the conference. The central theme of the seminar was how budget reforms, such as medium-term expenditure frameworks, performance budgeting, and spending reviews can promote fiscal sustainability through improving public spending. Reform practitioners from Asian and some OECD countries presented and discussed their experiences.

Workshop on Tax-Induced Debt Bias


What does the financial crisis teach us about tax-induced debt bias? And what is the best policy response to it? On March 4, 2011 FAD organized an expert workshop in Washington, D.C. on these issues. FAD Director Carlo Cottarelli delivered the opening address and experts from Europe and the United States with backgrounds in public finance, tax law, and corporate finance presented their recent work and discussed preliminary FAD research. The views and discussions offered input for an IMF Working Paper and a forthcoming Staff Discussion Note.

The 2nd Annual Regional Seminar of the Latin American Treasurers

Long Term Trends in Public Finances in the G-7 Economies

The Seminar was organized jointly by the IMF, World Bank and IDB and it was held in Mexico City during March 16-18, 2011. The seminar discussed active debt management; operational risk management and business continuity planning; the relationship between the Treasury, the Central Bank, and commercial banks; and the remuneration of transaction services and government balances at the Treasury Single Account. During the seminar the treasurers created a permanent Forum and elected their first president, Mrs. Cantellano, head of the Mexican Treasury. Colombia was selected as the venue for the next seminar.

Policy Paper on Health Care Reform

The policy paper Macro-Fiscal Implications of Health Care Reform in Advanced and Emerging Economies analyzes developments in public health spending over the past 40 years and provides projections for 50 advanced and emerging countries over 2011–50. The paper discusses the effects of specific health reforms on public health spending in advanced economies and examines the challenges facing emerging economies as they seek to expand coverage of health care in a fiscally sustainable manner

Staff Discussion Note

A Fiscal Indicator for Assessing First and Second Pillar Pension Reforms,” by M. Soto, B. Clements, and F. Eich. This note, discussed in the iMFdirect Blog, argues that traditional deficit and debt indicators reflect the health of public finances today but fail to capture the future fiscal impact of pension reforms. Thus, they could create incentives to delay or even reverse pension reforms. The note proposes a new fiscal indicator—the “pension-adjusted” budget balance—which provides a level playing field for the evaluation of a country’s pension policies.

Technical Notes and Manuals

Tax Policy: Designing and Drafting a Domestic Law to Implement a Tax Treaty,” by K. Nakayama is addressed to tax policy departments in emerging and developing economies that are expanding their tax treaty network. It discusses the design and drafting of domestic law to implement tax treaties, and the role of domestic laws to counter “tax treaty shopping” practices.

When and How to Adjust Beyond the Business Cycle? A Guide to Structural Fiscal Balances,” by F. Bornhorst, G. Dobrescu, A. Fedelino, J. Gottschalk, and T. Nakata discusses the adjustment of fiscal balances to take account of a broad range of factors such as asset and commodity prices and output composition effects. It also provides software codes for this purpose.

Technical Assistance Activities

During January–April 2011, FAD provided 75 technical assistance missions to IMF member countries and multi-country organizations.

Career Opportunities

FAD seeks talented and dedicated professionals with a background in different areas of public finance, to work on macro-fiscal policy issues and to provide technical assistance advice to IMF member countries on public financial management, tax policy reform, revenue administration, and different expenditure policy issues. Vacancies in FAD for staff and long-term expert positions are posted on FAD also seeks experts who are interested in occasional short-term (2–3 week) assignments; interested candidates may send their CVs to