As part of borrowing from the IMF, the IMF and the country that is borrowing agree on the implementation of certain policies (conditions) during the program period. The implementation of some conditions is not essential for the continuation of the program, including some pertaining to budgetary expenditures. Their implementation often vary from country to country, and the empirical analysis shows that certain budgetary conditions achieve their intended objectives over the long term, while others do not. In this blog, I explain which budget conditions work, and which don’t work.
CGD Policy Blogs
The Road to Universal Health Coverage in the Eastern Mediterranean Will Be Paved with Tough Policy Choices
In a meeting in Salalah, Oman earlier this month, representatives (including ministers of health) of 22 countries in the World Health Organization’s Eastern Mediterranean region reaffirmed their commitment to universal health coverage (UHC) by signing the UHC 2030 Global Compact, making the Eastern Mediterranean the first WHO region to do so. These countries are now obligated to accelerate their progress towards UHC, which is also a Sustainable Development Goal target.
It is time that donors and technical assistance providers turn their attention to tax concessions provided by developing countries struggling to raise more taxes from domestic sources. The granting of tax concessions is not only mostly opaque and prone to corruption, but these concessions are further constricting the already narrow tax base of countries, thereby undermining the Addis Ababa Action Agenda to promote domestic resource mobilization. There is a risk that additional revenues collected through tax reforms may be lost through tax concessions.
In development circles these days, there is considerable emphasis on developing countries collecting more taxes domestically to help achieve the SDGs. But with this attention to domestic resource mobilization, we shouldn’t lose sight of a critical point: collecting more taxes will only advance the SDGs if the revenues are spent efficiently.
A large proportion of revenue gains over the last two decades has come from countries’ efforts to improve the design and compliance of consumption and other indirect taxes, particularly the VAT (value-added tax); in doing so, the objective has been to minimize VAT’s regressive effects by exempting sales of small businesses below a threshold (where the poor typically tend to buy) as well as imposing zero tax on certain food and other products which take up a large proportion of consumption of poor households. Less attention has gone to expanding the coverage of potentially more progressive taxes, such as personal income and property taxes.
I spoke at the 30th Regional Seminar on Fiscal Policy, hosted by the Economic Commission for Latin America and the Caribbean (ECLAC). This year’s seminar focused on the role of fiscal policy in achieving more inclusive and equitable economic growth to meet the 2030 agenda of the SDGs.