Shamsuddin Tareq

Fiscal Management of Scaled-Up Aid

This paper discusses the role of fiscal policy and fiscal institutions in managing scaled-up aid. In an environment of volatile scaled-up aid, fiscal policy formulation should be anchored in medium-term frameworks, incorporating a longer-term view of potential resource availability and spending plans. There is merit in smoothing expenditures over time so that all programs are adequately funded. The paper argues that wage-bill ceilings should be used in Fund-supported programs only in exceptional cases. The paper also discusses basic reforms for strengthening public financial management systems for effective utilization of scaled-up aid flows.

Designing Monetary and Fiscal Policy in Low-Income Countries

Macroeconomic outcomes in low-income countries (LICs) have improved markedly in recent years, but important questions remain regarding possible adjustments in the design of IMF-supported programs in such countries. This paper draws on a review of the literature as well as the experience of 15 LICs that have attained some degree of macroeconomic stability to discuss, for example, the appropriate target range for inflation in shock-prone LICs; whether countries should use fiscal space to cut excessive tax burdens, reduce high debt levels, or raise public spending; and how the effectiveness of public expenditures can be improved.

Is the PRGF Living Up to Expectations

In late 1999 the IMF established the Poverty Reduction and Growth Facility (PRGF) to integrate the objectives of poverty reduction and growth more fully into its operations for the poorest countries, and to base these operations on national poverty reduction strategies prepared by the country with broad participation of key stakeholders. A review of the program would be conducted two years later. This paper synthesizes two papers prepared by IMF staff: Review of the Poverty Reduction and Growth Facility: Issues and Options, and Review of the Key Features of the Poverty Reduction and Growth Facility: Staff Analyses. The paper draws on a broad range of internal and external views gathered between July 2001 and February 2002, including discussions at regional forums, meetings with donor government officials and representatives of civil society organizations, and comments of key officials in member countries with PRGF arrangements.

Postconflict Countries Strategy for Rebuilding Fiscal Institutions

One of the most destructive effects of conflicts is the damage they inflict on the social, economic (including fiscal and monetary), legal, and political organization of a society; that is, its ‘institutions’. In particular, conflicts affect at least five market-supporting institutions: property rights, regulatory institutions, institutions for macroeconomic stabilization, institutions for social insurance, and institutions for conflict management (Rodrik 2000b). Recent empirical evidence shows a strong relationship between these market-supporting institutions and economic growth (Acemoglu et al. 2003; North 1990; Olson 1993; Rodrik 2004; Rodrik et al. 2002). Hence, institutional reconstruction and development is one of the key priorities in the post-conflict era. Re-establishing institutions can help to sustain peace by laying the groundwork for a resumption of economic activity. Sustained peace, in turn, can further accelerate the process of recovery in the aftermath of conflict.

Fiscal Transparency and the Performance of Government Financial Assets

Stock-flow adjustments are typically measured as the difference between changes in gross debt and deficits. These are interpreted as a proxy for unexplained fiscal discrepancies, and often associated with a lack of fiscal transparency. However, such measures fail to capture the role of financial assets and valuation changes and therefore do not correctly predict fiscal transparency. The purpose of this paper is to provide a more detailed exposition of stock-flow residuals and the relationship with fiscal transparency, highlighting government acquisition of equities and investment fund shares and their performance in secondary markets. The results suggest that the performance of government equity portfolios correlates with fiscal transparency to the extent that fully transparent governments are expected to generate between 6 and 8 percent higher returns on their equity portfolios than others. These findings suggest that the performance of government assets may be a promising area for future research of fiscal transparency and stock-flow residuals.

Economic Reform in Arab Countries; A Review of Structural Issues for the Remainder of the 1990's

The paper reviews the main structural reform issues facing Arab countries in the remainder of the 1990s. While the nature, extent, and implications of the policy challenges differ among individual countries in the Arab region, several aspects are common to a large number of them. Accordingly, the paper identifies a framework consisting of a core of key reforms that would address these countries` structural weaknesses and assist them in exploiting their considerable economic potential.

Budgets That Are More Pro-Poor and Pro-Growth

The paper addresses one of the key features and expectations of the PRGF: are budgets more pro-poor and pro-growth? Relying on abundant data gathered from numerous countries, the authors show that indeed the composition of both budgeted and actual public spending is shifting towards poverty-reducing activities in countries with a PRGF program. In particular, the paper shows that countries are allocating more to education and health care in their budget and that actual outlays in these sectors have also increased. The paper also makes the case for increased flexibility in accommodating higher spending when unexpected foreign aid becomes available.