The IMF/World Bank annual meetings were held from 9 to 15 October 2023.

Improving Tax Capacity in Developing Countries

On 15 October 2023, a fiscal forum was held on improving tax capacity in developing countries. The address by Katherine Baer of the IMF highlighted that half the emerging market countries and many low-income countries still have tax-to-GDP ratios below 15%, so there is plenty of untapped potential. Looking at the “tax frontier” – the maximum tax that could be collected in the current circumstances of a country – the emerging markets could increase their tax-to-GDP ratios on average by a further 5 percentage points and the low-income countries by a further 6.7 percentage points. The low-income countries could also improve their revenue collection position by strengthening their institutions of governance. Lower income developing countries could double their VAT revenue by broadening the tax base without increasing the tax rate. They could review the use of excise taxes, including health and environmental taxes.

Briefing on the Fiscal Monitor for October 2023

During the annual meetings the IMF held a briefing on the latest issue of the Fiscal Monitor with the title Climate Crossroads: Fiscal Policies In a Warming World. Countries need to implement the correct mix of policies in managing the climate transition. Many countries are implementing policies to reduce carbon emissions with an emphasis on spending measures, such as subsidies for renewable energy and increased investment. The Fiscal Monitor emphasises that governments must find the optimal mix of revenue- and spending-based climate mitigation measures. Carbon pricing is necessary, but it should therefore be accompanied by other mitigation instruments that can address market failures, promote innovation and facilitate the introduction of low-carbon technologies. Governments must increase spending efficiency and increase their capacity for raising tax revenues by broadening the tax base and improving their fiscal institutions.

Boosting Growth with Domestic Resources

On 12 October a panel including the Finance Ministers from Egypt, Germany and Canada discussed the issue of employing domestic resources to boost economic growth in the current challenging circumstances. The IMF First Deputy Managing Director, Gita Gopinath, noted that debt service payments are going up and there are structural spending needs such as the climate transition, industrial policy, defence spending and the sustainable development goals (SDGs). Countries can increase the tax base to increase revenue as there are currently too many exemptions and these make the taxes more regressive. Also, countries can raise tax rates. Wealth could be taxed more effectively. Carbon pricing and carbon taxes can be implemented, and if this is done correctly the economies can still grow.

Building capacity for Africa’s economic empowerment

The panellists for this high-level discussion of capacity building included the Finance Minister of Sierra Leone, Sheku Bangura, and the Central Bank Governor of the Seychelles, Caroline Abel. The IMF First Deputy Managing Director, Gita Gopinath, noted that capacity development is one third of the IMF workload, involving strengthening institutions and expertise. About 50% of this capacity building spending goes to Africa. Continuous engagement and proximity to the officials on the ground are important for IMF capacity building effectiveness.

Transforming Public Finance Through GovTech

The speakers at this capacity development talk noted that GovTech activities focusing on the digitalisation of public finance have become an important part of the fiscal capacity development work of the IMF. Implementing GovTech projects can improve fiscal operations for citizens; increase fiscal transparency and accountability; and promote sustained revenue mobilization. Sailendra Pattanayak of the IMF Fiscal Affairs Department noted that the IMF supports government systems to deliver services; helps to build technical platforms for transparency and open data; and supports the use of advanced data analytics to inform decision-making.

Financing Resilience, Growth and Shared Prosperity

Kevin Chika Urama, the African Development Bank (ADB) Chief Economist, noted that economic growth is returning to pre-pandemic levels in Africa, despite high levels of debt and other adverse factors. This is a source for optimism. However, institutions are weak in African countries. Around 11% of government revenue on average goes to debt servicing. Despite this, Africa is the next growth pole of the world with average economic growth around 3.8%. Good governance is required to allow financing to come in. Projects and long-term plans must be drawn up and domestic resource mobilisation is also important. It is necessary to catalyse the private sector to close the gap in financing needs.

Rania Al-Mashat, the Minister of International Cooperation of Egypt, noted that south-south cooperation and triangular cooperation are important. Country ownership of projects is also important. Government commitment, clarity and credibility is required to attract the financing. Financing is received if a country is a credible and trusted partner.

Tracking Trade Disruptions from Space

At the annual meetings the PortWatch online platform was introduced to the attendees. The platform which going live from 15 November 2023 is intended to help policymakers to respond to trade issues by highlighting changes in trade patterns in response to natural and geopolitical events. It uses a world map to monitor trade volumes at ports. Users of the platform will be able to see disruptions to maritime trade flows resulting from world events, including weather-related trade patterns and disruption caused by natural disasters. Although intended primarily for policymakers the platform can be accessed by everyone.