Public Investment and Fiscal Policy Teresa Ter-Minassian Director, Fiscal Affairs Department International Monetary Fund January 24, 2005.

Slides:



Advertisements
Similar presentations
Center for Emerging Market Enterprises
Advertisements

1 Public Private Partnerships What are They? Theory and Practice Carlo Cottarelli Deputy Director, Fiscal Affairs Department, IMF February 2008.
STRENGTHENING FINANCING FOR DEVELOPMENT: PROPOSALS FROM THE PRIVATE SECTOR Compiled by the UN-Sanctioned Business Interlocutors to the International Conference.
1 Macroeconomic and Policy Challenges International Monetary Fund Disclaimer: The views expressed in this paper are those of the authors and should not.
REGIONAL (TERRITORIAL) DEVELOPMENT
+ African Legal Support Facility Negotiations of natural resource contracts : Role of ALSF 2013 African Legal Support Facility Stephen Karangizi Director,
CSHE & LH Martin Institute Seminar PERFORMANCE INDICATORS AND PERFORMANCE-BASED FUNDING FOR TEACHING AND LEARNING IN AUSTRALIAN HIGHER EDUCATION Contributing.
THE ECONOMIC DEVELOPMENT IN AFRICA REPORT st January 2014 Chapter 4 Policies for Accelerating Investment in Africa: National and Regional Aspects.
Public-Private Partnerships: Basic Considerations, Accounting and Reporting Issues Presentation by Max Alier Resident Representative in Brazil International.
Saving, growth and the current account Daan Steenkamp ERSA / SASI Savings workshop August 2009.
Public Investment and Fiscal Policy: Lessons from the Pilot Country Studies Gerd Schwartz Expenditure Policy Division Fiscal Affairs Department International.
Economic Growth in Mozambique Experience & Policy Challenges Crispolti, V. (AFR) Vitek, F. (SPR)
Enhancing Data Quality of Distributive Trade Statistics Workshop for African countries on the Implementation of International Recommendations for Distributive.
Structural Reforms and Growth: G20 Framework Presentation by Zia Qureshi World Bank G24 and The Growth Dialogue High-Level Seminar on New Challenges to.
The Importance of Macroeconomic Frameworks for Economic Stability Dave Ramsden 11 January 2006.
International Experience with Rules-Based Fiscal Frameworks: Design Issues George Kopits Fiscal Council Republic of Hungary Conference on Fiscal Frameworks.
Public Sector Perspective on CSR and Responsibility Who is Responsible for Responsibility? Santiago, Chile September 2005.
DECENTRALIZATION AND RURAL SERVICES : MESSAGES FROM RECENT RESEARCH AND PRACTICE Graham B. Kerr Community Based Rural Development Advisor The World Bank.
Luis Servén The World Bank ECLAC January 2005 Latin America’s infrastructure gap: a macroeconomic perspective.
Fiscal Space for Investment in Infrastructure in Colombia Rodrigo Suescún The World Bank January 2005.
Department of Economics and BusinessBIS Phuket
June, 2003 Poverty and Climate Change Reducing the Vulnerability of the Poor through Adaptation Poverty and Climate Change Reducing the Vulnerability of.
Public Private Partnerships for financing of infrastructure development Akash Deep Harvard University December 1, 2005.
Budget Reform and Policy Implementation General Course on Good Governance Centre for Human Rights 8 July 2002.
Achieving the MDGs: RBA Training Workshop Module 8: Developing the MDG-based poverty reduction strategy 9-12 May 2005.
Session 8. The volatility of private capital flows in developing countries and the potential role of BRICS development bank to counter pro-cyclicality.
1 Preliminary assessment of progress in implementing the EERP Alexandr Hobza, Directorate General for Economic and Financial Affairs European Commission.
Dr Odysseas Michaelides Auditor General of the Republic June 2014 The role of the SAIs in times of economic crisis Audit Office of the Republic of Cyprus.
3-1 Chapter 3 Central Bank. 3-2 Central Bank Definition:  “An institution which is charged with the responsibility of managing the expansion & contraction.
1 Enhancing the Effectiveness of Fiscal Policy for Domestic Resource Mobilization Patrick N. Osakwe Chief, Financing Development, UNECA.
Fiscal Policy & Aggregate Demand
Annual Meeting of INTOSAI Public Debt Working Group Nadi, Republic of Fiji Islands July 24-25, 2008 RECOMMENDATIONS ON XIX INCOSAI THEME 1 “MANAGEMENT,
Accelerating Africa’s Growth and Development to meet the Millennium Development Goals: Emerging Challenges and the Way Forward Presentation on behalf of.
Investment Planning and Framework for PPPs Mozambique: Economic Challenges and Opportunities Justin Tyson Fiscal Affairs Department, IMF 1.
Washington, September Managing in frastructure for social and productive development Pablo Sanguinetti Research Director Corporación Andina.
PREVENTION, PROTECTION, PROMOTION THE WORLD BANK’S EVOLVING FRAMEWORK OF SOCIAL PROTECTION IN AFRICA MILAN VODOPIVEC WORLD BANK Prepared for the conference.
The Role of Fiscal Institutions in Managing the Oil Revenue Boom CEPAL XIX Regional Seminar on Fiscal Policy January 2007 Rolando Ossowski Fiscal Affairs.
The Public Finances and the Pacto Fiscal: Comments Adrienne Cheasty Senior Advisor, Fiscal Affairs Department International Monetary Fund CEPAL 20 th Regional.
International Policy Dialogue Forum on Teacher Challenges for EFA in India May 2012.
1 The role of Government in fostering competitiveness and growth Ken Warwick Deputy Chief Economic Adviser UK Department of Trade and Industry.
WHAT’S CHANGED POST THE FINANCIAL SUSTAINABILITY INQUIRY? FMG Seminar 27 March 2009 Presented by John Comrie.
Masahiro Kawai Dean and CEO, Asian Development Bank Institute 15 September 2010, New Delhi Sustainable Growth and Enhancing Integration in Asia A Joint.
POLITICS AND STATISTICS: A HAPPY MARRIAGE? Peter van de Ven Head of National Accounts OECD World Statistics Congress, STS 045 Hong Kong, August 25-30,
Plenary 6 Making the Best of Business Opportunities PhD. Reyes Juarez President of Fepac.
1 The Monterrey Consensus: Progress, Challenges and Way Forward Patrick N. Osakwe Trade, Finance and Economic Development Division.
A BROAD VIEW OF MACROECONOMIC STABILITY JOSÉ ANTONIO OCAMPO UNDER-SECRETARY-GENERAL UNITED NATIONS.
Community-Driven Development: An Overview of Practice Community Development Strategies – how to prioritize, sequence and implement programs CommDev Workshop.
On the need for a new growth paradigm in Moldova and the role of the Moldova 2020 strategy Apostolos Papaphilippou Chisinau, 28 July 2011.
European Investment Bank Public-Private Partnerships in Financing and Providing Infrastructure Philippe Maystadt President, European Investment Bank Presentation.
Bogotá, September 2014 Energy efficiency in LAC: brief outlook of recent actions and pending challenges Daniel Hugo Bouille Climate Change and Sustainable.
1 Structural Reform: An Important Aspect of Regional Economic Integration Kyung-Tae Lee.
DIRECTIONS OF RESTRUCTURING PUBLIC INVESTMENT IN VIETNAM Dr. Pham Lan Huong Presentation for training course Capacity building program to improve public.
Luis Servén The World Bank CLAI-OAS Energy Conference March Infrastructure in Latin America: a macroeconomic perspective.
THE LINKS BETWEEN ECONOMIC AND SOCIAL POLICIES JOSÉ ANTONIO OCAMPO UNDER-SECRETARY GENERAL ECONOMIC AND SOCIAL AFFAIRS.
UNEP EIA Training Resource ManualTopic 14Slide 1 What is SEA? F systematic, transparent process F instrument for decision-making F addresses environmental.
An overview of OECD Strategies for Improving Regulatory Performance Regulatory Reform and Building Governance Capacities – New Delhi 3 December 2009 Mr.
The Labour Market and the New Budgetary Framework Thomas Conefrey Irish Fiscal Advisory Council DPER Labour Market Policy Symposium 19 May 2015.
Budget Presentation 2010/2011 – 2013/2014 All Communities 28 January 2010.
Fiscal Space for Infrastructure Borrowing in South-Eastern Europe Brussels, September 21, 2005.
Supply-Side Economics
The current financial and economic crisis: Statistical initiatives of the E(S)CB Daniela Schackis European Central Bank – DG Statistics OECD Short-Term.
ADE’s 25 th anniversary Economic Governance: Key to Development ? Introduction Bruxelles – Bibliothèque Solvay – 5 October 2015.
Fiscal Rules for Subnational Governments Teresa Ter-Minassian Director, Fiscal Affairs Department International Monetary Fund Contact:
1 MOLDOVA PUBLIC EXPENDITURES FOR AGRICULTURAL DEVELOPMENT June 2006.
The Bahamas: Economic Outlook and Policies
Report on Pilot Questionnaire Results
Medium-Term Expenditure Scenario Analysis
Analyzing and Managing Fiscal Risks: Best Practices
Krishnan Sharma Financing for Development Office, UN DESA
International Experience with Rules-Based Fiscal Frameworks: Design Issues George Kopits Fiscal Council Republic of Hungary Conference on Fiscal.
Presentation transcript:

Public Investment and Fiscal Policy Teresa Ter-Minassian Director, Fiscal Affairs Department International Monetary Fund January 24, 2005

2 Outline of the presentation Public investment trends during Choice of indicators/targets for fiscal policy and its impact on public investment A strengthened approach to safeguarding public investment The role of PPPs Preliminary results of pilot projects

3 Public Investment Trends, Significant variation of trends in public investment (as a share of GDP) across countries and regions over the last three decades Fell to historically low levels in a number of OECD and Latin American countries Also, high degree of volatility in Latin America Declining public investment has been offset only in part by private investment

4 Public Investment Trends in Advanced OECD Countries and Selected Latin American Countries,

5 Why have we seen a declining trend in public investment? Short-term fluctuations mainly reflect comparative ease of cutting investment in a context of fiscal retrenchment. Long-term trends may also reflect: Changes in preferences about the size of public sector; and Data coverage changes, in particular due to privatization.

6 Impact of Decline in Public Investment on Growth and Social Indicators Empirical evidence on the long-term relation between public investment and growth is inconclusive. This likely reflects a number of factors: Public investments that do not directly boost a country’s productive potential. Current spending on social programs (such as education and health) may, in certain circumstances, be equally or more effective in removing impediments to growth. Not all public investment is of high quality.

7 Impact of Decline in Public Investment on Growth and Social Indicators (continued) Evidence on impact of infrastructure compression on growth is more robust: Calderón, Easterly, and Servén (2003) study for Latin American countries. Other recent World Bank studies focusing on links between infrastructure and MDGs. The World Bank is stepping up efforts to assess infrastructure gaps in various regions (REDIs)

8 Possible Fiscal Roots of Declines in Public Investment Concerns that focus on the overall fiscal balance and the gross public debt may unduly constrain scope to finance public investment in infrastructure. Alternative suggested approach: target current fiscal balance, excluding investment

9 Pros and Cons of Targeting the Current Fiscal Balance Advantages : Would promote intergenerational equity, by spreading the costs of public investment over time. Would recognize that productive public investment adds to the stock of capital and, therefore, does not reduce the net worth of the government. Disadvantages: Does not recognize possible short-term financing constraints May conflict with need to curb excess demand Does not take into account the quality of public investment projects May encourage creative accounting May detract attention from other budgetary priorities May create a bias against private involvement in infrastructure

10 Safeguarding Government Investment: A Strengthened Approach Given the significant risks entailed by a shift to a current balance approach, and its avoidance of real trade-offs between investment and other budget priorities, it is preferable to continue targeting the overall balance and the gross public debt. However, steps can and should be taken by governments to safeguard productive public investment, including during fiscal retrenchment periods.

11 Safeguarding Government Investment: A Strengthened Approach (continued) Such steps could include: Improve assessments of impact of proposed new government investment projects on growth and the public finances in the short to medium term Increase focus on trends in the current fiscal balance and government’s net worth; when appropriate, use the current fiscal balance as a supplementary fiscal policy target. Make greater use of mechanisms aimed at reducing the volatility and procyclicality of fiscal policy, including when appropriate, the adoption of structural (cyclically adjusted) budget targets. Improve the productivity and cost-effectiveness of government investment.

12 The Role of PPPs in Stepping up Infrastructure Investment PPPs should be preferred to direct public investment if they lead to efficiency gains. Key considerations in this area include: The standard of services to be provided by PPPs can be adequately specified in the contract There is an appropriate sharing of risks between the public and the private sector The intervention of a private partner can help mobilize resources There is adequate competition in the bidding process, and in the subsequent provision of services, or an appropriate regulatory framework for the latter A robust institutional framework is in place The fiscal implications of PPPs are appropriately disclosed and accounted for.

13 What can the Fund do to Assist Countries in Safeguarding Quality Public Investment Focus more systematically in surveillance on the quality of fiscal adjustment; in particular on trends and policies to support high quality public investment. Ensure that additional financing for high quality infrastructure investment is accommodated in fiscal targets of Fund- supported programs, when consistent with macro-stability and debt sustainability. Assist countries in: designing mechanisms to reduce volatility and procyclicality of their fiscal policies implementing the GFSM 2001, to facilitate the compilation and analysis of statistics on the public sector’s current balance and net worth

14 Testing the Proposed Approach Given, in particular, the significant resource costs involved in some of these steps, it was decided to undertake, in cooperation with the World Bank and other MDBs, some pilot studies to implement the steps outlined above. To ensure representativeness of these studies, an effort was made to span different regions and levels of development. Brazil, Colombia, Chile, Peru Ethiopia, Ghana India, Jordan Romania, Spain

15 Pilot studies: direct public investment  The full extent and impact of the decline in public investment is hard to gauge in some countries:  Effect of privatization (Peru, Brazil)  Issues of coverage of statistics and definitions (Colombia)  Impact of efforts to improve the screening of projects  In some cases (e.g., Peru) declining public savings, rather than adjustment, have squeezed the room for investment

16 Pilot studies: some policy dilemmas  Clear evidence of significant infrastructure gaps but difficult quantification  Constraints imposed by high public debt levels  Other potential problems:  currency mismatches  divergence between social and economic rates of return  Further work is needed to better understand relationship between public investment and growth

17 Pilot studies: quality as well as quantity  Project evaluation and selection systems need improvement  Inadequate funding of budgeted projects, excessive delays in execution, and increased costs  Poor planning and execution capacity of subnational governments  Poor ex-post quality control of projects  Failure to properly maintain projects after they are finished

18 Pilot studies: PPPs  Variety of experiences and degrees of sophistication  Brazil—recent legislation  Colombia—simulation of costs of contingent liabilities  Peru—no registry of contingent liabilities  Some common problems  Costly, frequent contract renegotiation  Too often, subsidy-dependent projects are structured as PPPs—often to bypass fiscal ceilings  Scope for learning from leaders (Chile, Colombia)  Careful contract design, effective regulation and careful assessment and disclosure of fiscal risks are key.