Making Fiscal Space Happen! Managing Fiscal Policy in a World of Scaled-Up Aid

aid, fiscal policy, low income countries, macroeconomic policy, public financial management

The Equilibrium Real Exchange Rate in a Commodity Exporting Country

Drawing on the existing literature, I estimate a long-run equilibrium real exchange rate path for Algeria. I find that the Balassa-Samuelson effect together with real oil prices explain the long-run evolution of the equilibrium real exchange rate in Algeria. The half-life of the deviation of the real exchange rate from the estimated equilibrium level is about nine months, similar to that in other commodity-exporting countries. The general conclusions are that: (i) there is a time-varying long-run equilibrium exchange rate in Algeria as in other commodity-exporting countries; and (ii) the real effective exchange rate of the Algerian dinar at end-2003 was broadly in line with this equilibrium.Exchange rates;exchange rate, real exchange rate, real effective exchange rate, effective exchange rate, real trading partners, terms of trade, foreign exchange, oil prices, exchange rate policy, exporting countries, domestic economy, equilibrium exchange rate, exchange rate path, exchange rate regime, nominal exchange rate, basket of currencies, foreign exchange market, exchange rate behavior, real exchange rate behavior, political economy, terms of trade shocks, open economy, nominal exchange rate policies, real exchange rate path, imported good, trade shocks, tradable goods, exchange rate target, export prices, oil shock, exchange rate dynamics, trading partner, exchange rate levels, nontradable goods, market equilibrium model, perfect competition, exchange rate targeting, trade liberalization, domestic production, intermediate inputs, aggregate consumption, trade losses, commercial policies, constant real exchange rate, balance of payments, trade liberalization measures, import restrictions, partner countries, overvalued exchange rate, domestic price

Financing Transportation Infrastructure: Potential Fiscal Risks of Innovative Financing Mechanisms

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Reforming Government Subsidies in the New Member States of the European Union

Subsidy reform has been a key component of the pre-accession reform agenda of the 10 new member states that joined the EU in 2004 (EU-10). During the pre-accession period, these countries had to undertake a number of important structural reforms in their economies. One of the most critical reforms was to reduce, and in some cases, eliminate their subsidy programs. This paper analyzes how key subsidy reforms (in state aid to enterprises, agriculture, energy, and transportation) were carried out in the EU-10 during 1995–2005, and explains observed variations across types of subsidies and across countries. Based on an extensive qualitative analysis, the paper draws lessons for future successful reforms of government subsidies. 32BEuropean Union;Agricultural subsidies;Economic reforms;subsidies, subsidy, energy subsidies, energy subsidy, subsidization, tariff increases, consumer subsidies, internal market, producer subsidies, import duties, transition period, cash transfers, indirect subsidies, transport services, price liberalization, export subsidies, electricity subsidies, production subsidies, transport sector, transport company, safety nets, price subsidy, competition policies, transport costs, trade restrictions, transport companies, political economy, commercialization, competition rules, trade union, tariff structure, price subsidies, increasing trade, average tariff, absence of competition, social safety nets, national laws, input subsidies, full liberalization, social safety net, safety net, free competition, food industry, bilateral contracts, transport operators, interest groups, international standards, common market, competitive pressures

Making Fiscal Space Happen!

Debt relief and the scaling up of aid to low-income countries should allow for increased fiscal space for expenditure programs to spur long-term growth and reduce poverty. But as discussed in Peter Heller’s article “Pity the Finance Minister†(World Economics, Vol. 6, No. 4), designing a suitable medium-term fiscal framework that fosters a sustainable delivery of better public services and infrastructure while maintaining a credible commitment to fiscal prudence raises many challenges. This article first discusses what low-income countries can do to formulate fiscal policy frameworks that are ambitious in their goals for absorbing additional aid while maintaining longer-term sustainability of the expenditure programs and government finances. It then suggests the approaches required to manage the heightened fiscal policy risks associated with a scaled-up aid environment, including issues of coordination with monetary policy. And finally, the article discusses what institutional changes are needed if donors and countries are to facilitate the implementation of a higher level of aid-financed spending programs.

Making Fiscal Space Happen

Debt relief and the scaling up of aid to low-income countries should allow for greater fiscal space for expenditure programs to create long-term growth and lower poverty rates. But designing a suitable medium-term fiscal framework that fosters a sustainable delivery of better public services and infrastructure while maintaining a credible commitment to fiscal prudence confronts many challenges. This paper discusses what low-income countries can do to shape fiscal policy frameworks that are ambitious in trying to absorb additional aid while still ensuring longer-term sustainability for government expenditure programs and finances. It suggests what approaches can be used to manage the greater fiscal policy risks associated with a scaled-up aid environment, including coordination with monetary policy. The paper also discusses what institutional changes are needed if donors and countries are to facilitate the implementation of a higher level of aid-financed spending programs.Economic assistance;Public finance;expenditure, fiscal policy, mtef, expenditure programs, mtff, budget support, expenditures, medium-term fiscal framework, fiscal rules, fiscal space, medium-term expenditure framework, public expenditure, medium-term expenditure, capital expenditure, fiscal policy framework, public debt, fiscal balance, fiscal framework, expenditure program, expenditure framework, public financial management, general budget, fiscal management, mtbf, fiscal risks, annual budget, fiscal targets, fiscal deficit, government expenditure, social expenditure, primary deficit, fiscal programming, fiscal policies, composition of expenditure, tax revenue, fiscal discipline, fiscal program, fiscal sustainability, debt service, expenditure envelope, budget process, fiscal institutions, budget constraint, fiscal policy coordination, fiscal authorities, fiscal adjustment, government revenue, capital expenditures, public expenditures, fiscal reporting, expenditure target, aggregate fiscal, fiscal outcomes, fiscal prudence, fiscal risk, public spending, fiscal plans, tax base, fiscal balances, fiscal consolidation, fiscal policy objectives, medium term expenditure, government budget, medium term expenditure framework, expenditure plans, fiscal performance, expenditure priorities, fiscal affairs department, tax compliance, medium-term fiscal projections, composition of expenditures, fiscal perspective, interest expenditure, government expenditures, fiscal criteria, national budget, fiscal reporting framework, expenditure needs, fiscal spending, expenditure frameworks, fiscal stance, expenditure implications, fiscal position, fiscal policy response, tax expenditures, fiscal agent, medium-term budgetary framework, budgetary process, expenditure patterns, fiscal programs, expenditure mix, primary fiscal balance, expenditure ceilings, expenditure adjustment, fiscal objectives, expenditure inefficiencies, debt obligations, fiscal policy formulation, fiscal projections, budgetary allocations, fiscal policy targets, fiscal commitments, aggregate expenditure, medium-term projection, medium term expenditure frameworks, primary fiscal deficit, fiscal adjustments, expenditure commitments, expansion of expenditure, expenditure areas, fiscal policy frameworks, fiscal policy objective, recurrent expenditure, prudent fiscal policies, social expenditures, budget management, foreign debt, tax incentives, annual budgets, fiscal revenue, medium-term budgetary projections, fiscal policy management, fiscal data, tax collection, public expenditure management, fiscal agencies, fiscal operations, fiscal debt, fiscal affairs, expenditure management, statement of fiscal policy objectives, fiscal shocks, fiscal accounts