1. FISCAL MANAGEMENT MODEL Savenaca Narube Team Leader PEM TA

2. Aims and purposes of the FMM Aim To assist the Ministries of Finance maintain fiscal stability Purposes Predict long term implications of fiscal policies on the budget; Explore the mix of policies that will provide the desired impact on the budget; Explain the likely effects of policy decisions; and Policy and budgeting tool.

3. Preliminaries Not an economic model: e.g. GDP and inflation are projected outside the model. Its a budget projection modelsimple, spreadsheet based Projection period: 10/15 years Projections Three years ahead: MTBF Beyond three years: Simple assumptions

4. Examples of long run assumptions Economic Real GDP--long run growth rate Nominal GDP--Inflate real GDP by inflation CPI1o year average Tax revenues Growth rate or % of nominal GDP/trend Departure taxvisitor arrivals

5. Examples of long run assumptions Expenditure Wages and salariesFully or partly indexed to CPI MaintenanceIndexed to CPI Contingency % of current expenditure Purchase of goods and serviceIndexed to CPI Subsidies and transfersFixed (Policy) Capital expenditureFixed (Baseline)

6. Structure of the FMM FINANCIAL TEMPLATE ASSUMPTION TAB WHAT IF TAB DEBT & NEW LOAN TAB OUTPUT TAB

7. Examples of scenario scanning Change in assumptions Change in the rate of growth of real GDP Change in the CPI growth rate Change in policy Change in the rate of consumption tax Change in the rate of indexation of wages and salaries Drawdown of a new loan in a certain future year

8. Outputs Tracks key fiscal indicators over the long term Compares the baseline and the impact of policy option Generate budget graphs/tables

9. Other issues Updatingautomatically linked to MTBF and debt statistics Degree of consolidation to suit countries Sustainability Manual PEM TA support Easy to use

10. DEMONSTRATION