Budget tightening over the past few years means that advanced economies have been able to narrow budget deficits by 4 percentage points on average by 2013, to half the level seen at the height of the crisis—with the notable exception of Japan,says the latest edition of the IMF’s Fiscal Monitor.
The report,expects public debt in most advanced economies to stabilize in 2013–14.
At about 110 percent of GDP, the average debt level across advanced economies is still 35 percentage points above its 2007 level, and bringing it down still requires sizable efforts. Although most high-debt countries have now delivered close to two-thirds of the adjustment needed to put their debt ratios on a firm downward path, historical experiences suggest that the main challenge
will be maintaining this fiscal stance for an extended period of time— until debt ratios reach more comfortable levels
While global growth prospects have generally improved, eyes have now turned to the United States where a fiscal showdown has begun to play out, “The government shutdown is bad enough, but failure to raise the debt ceiling would be far worse, and could very seriously damage not only the U.S. economy, but the entire global economy,” has said Christine Legard in a recent speech. “So it is ‘mission-critical’ that this be resolved as soon as possible.”
In addition, the report notes that high debt, an uncertain global environment, weak growth prospects, and a lack of well-defined medium-term adjustment plans in key economies, like the United States and Japan, complicate the task.
Fiscal vulnerabilities are on the rise in emerging market economies. Going into the crisis, they were in a much stronger fiscal position than advanced economies. Many of them used their hard-won fiscal space to support domestic demand and mitigate the impact of the global slowdown. But weakening growth prospects and rising borrowing costs are now putting pressure on their budgets.
All emerging economies that have seen their fiscal space shrink or disappear should start rebuilding their fiscal buffers.
Fiscal vulnerabilities are also a concern in low-income countries due to possible shortfalls in commodity prices and aid. Governments in many of these countries will need to identify alternative sources of revenue and improve the efficiency of their spending.
According to the IMF report, the tax measures adopted since the onset of the crisis do not rank high on the quality spectrum. “Expediency has been to the fore, with policymakers all too often violating the well-established principles that bases should be broadened before rates are raised,”
There has been some progress in the taxation of the financial sector.
However, the move to effective carbon pricing—which the IMF continues to stress is crucial to addressing climate change—has still hardly begun. And emerging and developing economies continue to rely on large commodity revenue windfalls to expand public spending even though these sources have proven volatile. So, while the scope for collecting more revenue varies widely from country to country, the report concludes that nearly all could and should tax better.
Fairness of tax systems is also under scrutiny, as evidenced by the renewed focus on the complex tax arrangements multinationals use to reduce their tax payments. More generally, tax systems have become less progressive, and inequality has increased over the past decades
The report,expects public debt in most advanced economies to stabilize in 2013–14.
At about 110 percent of GDP, the average debt level across advanced economies is still 35 percentage points above its 2007 level, and bringing it down still requires sizable efforts. Although most high-debt countries have now delivered close to two-thirds of the adjustment needed to put their debt ratios on a firm downward path, historical experiences suggest that the main challenge
will be maintaining this fiscal stance for an extended period of time— until debt ratios reach more comfortable levels
While global growth prospects have generally improved, eyes have now turned to the United States where a fiscal showdown has begun to play out, “The government shutdown is bad enough, but failure to raise the debt ceiling would be far worse, and could very seriously damage not only the U.S. economy, but the entire global economy,” has said Christine Legard in a recent speech. “So it is ‘mission-critical’ that this be resolved as soon as possible.”
In addition, the report notes that high debt, an uncertain global environment, weak growth prospects, and a lack of well-defined medium-term adjustment plans in key economies, like the United States and Japan, complicate the task.
Fiscal vulnerabilities are on the rise in emerging market economies. Going into the crisis, they were in a much stronger fiscal position than advanced economies. Many of them used their hard-won fiscal space to support domestic demand and mitigate the impact of the global slowdown. But weakening growth prospects and rising borrowing costs are now putting pressure on their budgets.
All emerging economies that have seen their fiscal space shrink or disappear should start rebuilding their fiscal buffers.
Fiscal vulnerabilities are also a concern in low-income countries due to possible shortfalls in commodity prices and aid. Governments in many of these countries will need to identify alternative sources of revenue and improve the efficiency of their spending.
According to the IMF report, the tax measures adopted since the onset of the crisis do not rank high on the quality spectrum. “Expediency has been to the fore, with policymakers all too often violating the well-established principles that bases should be broadened before rates are raised,”
There has been some progress in the taxation of the financial sector.
However, the move to effective carbon pricing—which the IMF continues to stress is crucial to addressing climate change—has still hardly begun. And emerging and developing economies continue to rely on large commodity revenue windfalls to expand public spending even though these sources have proven volatile. So, while the scope for collecting more revenue varies widely from country to country, the report concludes that nearly all could and should tax better.
Fairness of tax systems is also under scrutiny, as evidenced by the renewed focus on the complex tax arrangements multinationals use to reduce their tax payments. More generally, tax systems have become less progressive, and inequality has increased over the past decades
