Download Fiscal Policy for Inclusive and Sustainable Development Anis Chowdhury

Fiscal Policy for
Inclusive and Sustainable
Development
Anis Chowdhury
Director
Macroeconomic Policy and Development Division
Alberto Isgut and Daniel Lee
Economic Affairs Officers
Macroeconomic Policy and Development Division
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Fiscal policy – 3 roles
• Stabilization – countercyclical
(discretionary and automatic stabilizer)
• Developmental – public investment in
human capital and physical
infrastructure
• Social/equity – distribution, social
protection
Stabilization role –
optimal debt/GDP ratio?
Public debt & macro stability
Mild positive relationship is
driven by outliers.
“(T)here is no simple
relationship between debt
and growth. …Moreover,
there is no single threshold
for debt ratios that can
delineate the ‘bad’ from the
‘good’.” IMF, World Econ
Outlook (2012)
Developmental Role:
–Composition of public
expenditure
–Public procurement
Composition matters
• IMF-World Bank Development Committee Report 2006:
– “The fiscal deficit is a useful indicator … but it offers
little indication of longer term effects on government
assets or on economic growth.”
– “Attention be focused on the likely growth effects of
the level, composition and efficiency of public
spending and taxation.”
– “Fiscal policy that neglects these effects runs the risk
of achieving stability while potentially undermining
long-term growth and poverty reduction.”
Public procurement
North America
EU15
Russian Federation
Kazakhstan
Tajikistan
Median for NCA
countries: 5.5%
Georgia
Armenia
Azerbaijan
0
1
2
3
4
5
6
7
8
9
10
General governmental procurement expenses as percent of the GDP, 2010
Public procurement
Kazakhstan
Tajikistan
North America
Georgia
Russian Federation
Median for NCA
countries: 19.1%
Armenia
EU15
Azerbaijan
0
10
20
30
40
50
General governmental procurement expenses as percent of total general governmental expenses, 2010
Social/equity role:
–progressivity of tax
–social expenditure
Taxation & equity
70
SYC
ZAF
60
HND
COL
ARG
50
COG
PRY
MEX PER
CRI
SLV
BOL
BRA
LSO
CHL
SWZ
JAM
MKD
RUS
USA
THA
GEO MAR
TUR
ISR
MYS LTU VNM PRT
GBR
MNG
BIH
LVA
EST
IRL
JOR ESP POL
AZE
MDA
ALB
ITA
AUS
GRC
BEL
TJK IND ARM
CAN
CHE HRVFRA
ROU
NLD
HUN LUX
EGY
DEU SVN
AUT
BLR
KAZ
UKR
SRB
FIN
SVK CZE BGR
NOR
G in i c o e f f ic ie n t
CHN
40
IRN
y = -0.3017x + 44.964
R2 = 0.0592
BTN MDV
YEM
30
SWE
DNK
20
10
0
0
5
10
15
20
25
30
35
General government taxes over GDP (per cent)
40
45
50
Social protection & equity
70
General government social expenditures and inequality
SYC
ZAF
60
BOL
y = -0.3992x + 56.714
R2 = 0.3308
LSO
50
SLV
G i n i c o e f f i c ie n t
JAM
CHN
40
BTN
YEM
30
GEO
MDV
AZE
PRT
RUS
TUR
IRN
EST
ESP ITA LTU
LVA
BEL
GBR MDA
ALB
IRL POL
GRC
CAN LUXSVN
ROU HUN
UKR
NLD
AUT
KAZ EGY
BGR SRB
BLR
DEU
SVK
FIN NOR
CZE
SWE
DNK
ISR
20
10
0
0
10
20
30
40
50
60
70
General government social expenditures over total government outlays (per cent)
80
Fiscal status in North & Central
Asia:
–Fiscal space
Fiscal space
Azerbaijan
EU 15
Russian Federation
North America
Georgia
Armenia
Kazakhstan
0
10
20
30
40
50
Revenue of the general government as percent of the GDP, 2010
ESCAP’s estimates of a basic package
• A job guarantee programme
– 100 days per year for participants
• A universal, non-contributory pension
– For all aged 65 or older
•
Benefits to all persons with disabilities
– For all aged 15 65
• Increasing the share of public health expenditures
– 5% of GDP by 2030
• Universal enrolment in primary and secondary education
– Primary by 2020 and Secondary by 2030
• Energy access to all
– Modern energy services by 2030
Investing in people
 Overall public expenditure and investment
requirements to implement such a policy
package vary across countries
 Total investment needs of above package of
policies 4.7% to 22% of GDP by 2030
 Public investment needed to deliver policies to
sustain growth and promote inclusive and
sustainable development
• In the case of China, the cost of the package is
projected to reach 3.3% of GDP in 2020 and 5.2% of
GDP by 2030
• The cost of the package is projected to exceed 10%
of GDP by 2030 only in Fiji (13%) and Bangladesh
(22%)
Doable and economically sustainable
 Most countries can self-finance
• broadening tax bases,
• tax regimes more progressive,
• tax administration more efficient
• tighter regulations to avoid on tax evasion
• fighting corruption
• reducing non-development expenditures
 LDCs would need global partnership and development cooperation
 Will not jeopardize macroeconomic stability
Need for macroeconomic course correction
• New paradigm that emphasizes the developmental role of
macroeconomic policies.
• Grow now, distribute + clean up later is a dead end!
• Investing in social and environment pillars will strengthen the
economic pillar…
• …and lead to sustained, inclusive and equitable economic growth.
• Leaders in the Asia-Pacific should pledge to adopt forwardlooking macroeconomic policies to promote inclusive and
sustainable development
Thank you
References:
Economic and Social Survey of Asia and the Pacific
2013: Forward-looking Macroeconomic Policies for
Inclusive and Sustainable Development
Acknowledgement:
Amornrut Supornsinchai
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