Download IMF comments on selected SDGs targets

I am posting the following comments on behalf of my IMF colleagues Ali Abbas (Target 17.4) and
Chris Papageorgiou (all other targets). They have been cleared by Sean Nolan.
Target 17.4 Assist developing countries in attaining long-term debt sustainability
through coordinated policies aimed at fostering debt financing, debt relief and debt
restructuring, as appropriate, and address the external debt of highly indebted poor
countries to reduce debt distress
Indicator 17.4.1 Total number of countries that have reached their Heavily Indebted Poor
Countries Initiative (HIPC) decision points and number that have reached their HIPC
completion points (cumulative)
Proposal: Replace Indicator 17.4.1. with “Total number of countries using the World BankIMF LIC Debt Sustainability Framework (DSF) assessed to be at “high risk” or “in debt
distress”.”
Target 8.1 Sustain per capita economic growth in accordance with national
circumstances and, in particular, at least 7 per cent gross domestic product growth
per annum in the least developed countries
Comments:
Nowhere in the target is it specified that growth should be measured in real terms. Thus, we
suggest adding real to gross domestic product growth.
Also, real GDP growth of at least 7 per cent per annum, while desirable, is difficult to attain,
particularly if it is to be sustained over long periods. (In fact, growth of real GDP per capita of
7 per cent per annum doubles the level of real GDP per capita every 10 years, which
illustrate how fast the rate is). One of the best established empirical facts is that the growth
rate of real GDP per capita slows down as real GDP per capita levels increase, so it is
unrealistic to sustain this high level of growth over several decades (China and other South
East Asian countries are examples of countries which have managed to do so, but there are
not many others). Finally, a common target for growth of 7 per cent does not consider
national circumstances, including the level of real GDP per capita where they start from.
Proposals:
A more realistic objective would be set a target for growth for LDCs above the growth rate of
currently developed economies when they had the same level of real GDP per capita. Given
that low income countries can adopt technologies that were not available in the past, they
can conceivably grow faster than currently developed economies did at the same level of
real GDP per capita (leapfrogging). Besides the level of real GDP per capita, one could also
condition on some time-invariant country characteristics (e.g. small island developing state,
landlocked countries, etc.) to take into account the differences in potential growth across
groups of countries. Thus, this target is both quantifiable (using, for example, long time
series data from developed countries on real GDP per capita) and feasible. This target could
also be seen as a floor by adding the “at least” qualification. This might seem as a modest
goal, but the goal of “at least 7 per cent” runs the risk of becoming irrelevant if most LDCs
systematically fail to attain such high growth rates.
2
Goal 17 Strengthen the means of implementation and revitalize the global partnership
for sustainable development
Target 17.13 Enhance global macroeconomic stability, including through policy
coordination and policy coherence
Comments:
We consider that the current proposals by UNCDF and UNEP, both of which contain a
comprehensive list of macroeconomic indicators, are useful but not sufficiently coherent
among them or parsimonious to be of practical value. In particular, they require some
framework for their interpretation, which is currently not included in either proposal. For
example, the two indicators currently included, GDP and the current account balance as a
share of GDP are not, in an of themselves, indicators of macroeconomic stability, of policy
coordination or of policy coherence. While it is certainly true that a large current account
deficit as a share of GDP could be an indicator of an imbalance (and their presence often
precedes balance of payments crises), it should be compared with some notion or concept
of its equilibrium level.
Proposals:
The IMF has two multilateral policy issues reports which directly address the related issues
of macroeconomic stability, policy coordination, and policy coherence: 1. The External
Sector Report, which assesses the sustainability of the external balance of member
countries, and analyzes the sustainability of the current account balance, the assessment of
the real effective exchange rate relative to its equilibrium level (using various methods to
assess such equilibrium), and the adequacy of international reserves. 2. The Spillover
Report, which examines the external effects of domestic policies in five systemic economies:
China, the euro area, Japan, the United Kingdom, and the United States. In addition to
these two multilateral policy issues reports, the staff reports for the Article IV consultations
often contain the results of the IMF (or joint IMF-World Bank) debt sustainability analysis of
public and external debts of member countries.
The advantage of using the results of such reports over the proposed series of indicators is
that they contain both the macroeconomic variables which are one of the inputs needed to
assess macroeconomic stability, policy coordination and policy coherence, as well as the
analytical frameworks needed to interpret the variables. Even if the results of these reports
are not used for assessing global macroeconomic stability, including through policy
coordination and policy coherence, they should prove useful for guiding the selection of
indicators to be used and the frameworks with which to interpret and analyze such
indicators. If there is no agreement on the indicators and framework, we would support
deleting this target given the complexity of its measurement.
B. Targets related to the Fund’s core areas of expertise
Goal 8 Promote sustained, inclusive and sustainable economic growth, full and
productive employment and decent work for all
Target 8.2 Achieve higher levels of economic productivity through diversification,
technological upgrading and innovation, including through a focus on high-valueadded and labour-intensive sectors
3
Comments and proposals:
In terms of Indicator 8.2.1 (Growth rate of GDP per employed person), we believe total
factor productivity (TFP) should be the preferred measure of productivity. While it is true that
average labor productivity, as measured by GDP per person employed is more widely
available in terms of the number of countries for which both real GDP and the number of
workers employed are available, TFP should be used instead when available. Given that
time series for a large cross section of countries are becoming increasingly available, they
should be used to complement (if not substitute) for the series on average labor productivity.
Regarding the current proposal by UNCDF of including the percent increase in gross fixed
capital formation in sub national regions is neither feasible not advisable. While investment
is the basis for growth through capital accumulation, it is not unambiguously good. There are
several experiences of investment in inefficient projects which end up having negative rates
of return. There is also macroeconomic evidence that some countries could be investing
excessively or inefficiently, as the growth rate of real GDP per capita they have attain given
their investment rate might be very low.
Finally, we note that “technological upgrading” and “a focus on labor-intensive sectors”, two
of the objectives in the target, are frequently in opposition at the firm or sectoral level, as
much of technological upgrading is designed to reduce the use of labor by replacing manual
tasks with machinery, while in other cases the technological change which is embedded in
technological upgrading is often skilled biased. Nevertheless, the empirical evidence shows
that in the aggregate there is no such trade-off as that there is no secular increase in
unemployment rates, suggesting that the labor which is replaced by technological upgrading
in some sectors is reallocated to other sectors.
Target 8.3 Promote development-oriented policies that support productive activities,
decent job creation, entrepreneurship, creativity and innovation, and encourage the
formalization and growth of micro-, small- and
medium-sized enterprises, including through access to financial services
Comments:
We agree with the proposed indicator, the share of informal employment in non-agriculture
employment by sex. We also agree with the ILO’s and World Bank’s comment that Indicator
8.3.1 (Job openings rate (openings as % of employment and openings) and total
separations (separations as % of employment) in non-farm establishments) is not practical
given the very large number of countries for which none of the two proposed variables are
available.
Regarding indicator 8.3.2, percentage of MSMEs with a loan or line of credit, we think it is a
good indicator since, as was mentioned by the World Bank, is available for a wide cross
section of countries through their Enterprise Surveys. Moreover, this indicator has the
advantage that it can increase (showing increased access to credit by MSMEs) even while
the total number of MSMEs falls (potentially due to them becoming large as their productivity
increases).
4
Goal 16 Promote peaceful and inclusive societies for sustainable development,
provide access to justice for all and build effective, accountable and inclusive
institutions at all levels
Target 16.4 By 2030, significantly reduce illicit financial and arms flows, strengthen
the recovery and return of stolen assets and combat all forms of organized crime
Comments:
Regarding the suggested indicator, the total value of inward and outward illicit financial flows
(in current US$), as measured by Global Financial Integrity
(http://www.gfintegrity.org/issues/data-by-country/), we note that there is no official definition
of illicit financial flows (see, for example, the IMF’s Balance of Payments and International
Investment Position Manual, Sixth Edition (BPM6)), and thus no well-defined and widelyaccepted measurement of the magnitude of such flows. While we agree on their importance
of this phenomenon, we believe that prior work needed is needed on agreeing on a
definition and on its measurement before a target can be fruitfully. We believe that the
complementary proposals by the World Bank (Criminal investigations and prosecutions
focusing on combatting corruption, tax evasion, criminal networks and money laundering; by
country (number of cases); and (2) Freezing, confiscation/recovery and return of proceeds of
crime (with details on key crimes), by country (US$)) could be used until a definition of illicit
financial flows is adopted. Nevertheless, to be useful both indicators would need to be
properly normalized to account for the fact that the number of investigations and
prosecutions and the amounts of funds frozen or recovered are proportional to the size of
the population and the economy, respectively.
We have no comment on the indicator “Percentage of seized and collected firearms that are
recorded and traced, in accordance with international standards and legal instruments”
proposed, as it lies outside the Fund’s area of expertise
Target 16.5 Substantially reduce corruption and bribery in all their forms
Regarding indicators 16.5.1 (percentage of population who paid a bribe to a public official, or
were asked for a bribe by these public officials, during the last 12 months) and 16.5.2
(percentage of businesses that paid a bribe to a public official, or were asked for a bribe by
these public officials, during the last 12 months), we notice as above that they should be
normalized to account for the fact that the number of potential contacts between citizens,
whether on a personal capacity or while doing business, and public officials, depends also
on the level of economic activity, such that the base over which the indicator would need to
be divided by to obtain a prevalence rate changes with the level of development.