Overview. Useful Concepts & Indicators. I. The Government Budget II. III. Debt Sustainability. Jan Gottschalk TAOLAM

Transcription

1 Analyzing the Fiscal Sector Overview Jan Gottschalk TAOLAM This training material is the property of the IMF Singapore Regional Training Institute (STI) and is intended for the use in STI courses. Any reuse requires the permission of the STI. This training activity is funded with grants from Japan. Overview I. The Government Budget II. Useful Concepts & Indicators III. Debt Sustainability 1

2 I. The Government Budget Revenue Tax revenue 30.0% Non-tax revenue 25.0% Grants 20.0% Expenditure 15.0% Expense 10.0% Net acquisition of 5.0% nonfinancial assets 0.0% Net lending / borrowing -5.0% Net acquisition of -10.0% financial assets Net incurrence of liabilities Fiscal Revenue and Expenditure (in % of GDP) Revenue (incl. grants) Expenditure 2007/08 Net lending / borrowing 3 Revenues and grants Revenues: Tax revenues: Income and profit taxes; VAT; excises; import duties; royalties Non-tax revenues: Dividends; operating surpluses of public enterprises; administrative i ti fees; over-flight revenues Grants: Transfers from other governments or international institutions. 4 2

3 Expenditure Expense (current expenditures) Compensation of employees; goods and services; transfers; interests payments; other Acquisition of nonfinancial assets (capital expenditures) Government investmen acquisition of land, buildings and physical capital equipment to be used for more than one year Domestically or externally financed 5 Financing (GFS 1986) Total revenues and grants Total expenditures = OVERALL BALANCE If revenue < spending overall balance < 0 (deficit) need to finance the deficit Domestic borrowing - Central bank (monetization) - Bank financing - Non-bank financing Foreign borrowing 6 3

4 Financing (GFS 2001) Total revenues and grants Total expenditures = Net lending/borrowing If revenue < spending Net borrowing need to finance the deficit Net acquisition of financial assets Deposits in BOL or commercial banks [+: drawdown in deposits] Onlending [+: reduction in outstanding loans] Net incurrence of liabilities Domestic: Borrowing from BOL or commercial banks [+: increase in outstanding loans] Issuance of securities [+: increase in outstanding stock of securities] Foreign [+: increase in outstanding loans] 7 Coverage General Government Central Government Budgetary activities of central authority Extra budgetary funds / autonomous agencies relevant to central government policies, or under its control. consolidation of accounts Subnational Government Budgetary & extra budgetary activities outside central government (regional, state, and local governments) General Government 8 4

5 What are key budgetary developments in Lao PDR? Analysis in terms of GDP ratios Create graph(s) of fiscal ratios What to look for? Important changes What is behind these changes? What are the implications? Exercise 9 What were key revenue developments? Revenue (in % of GDP) But remember: there are many different ways to look at revenue developments and the chart shown here provides only one of many viewpoints! 25.0% 20.0% 15.0% 10.0% 5.0% Resource revenues Non-resource revenues 00% 0.0% 2007/

6 Consider expenditure developments 30.0% 0% Expenditure (in % of GDP) 25.0% 20.0% 15.0% 10.0% 5.0% Expense Acquisition of nonfinancial assets 0.0% 2007/08 11 as well as net borrowing and financing composition: Financing (in % of GDP) 8.0% 6.0% Net acquisition of financial assets 4.0% 2.0% Net incurrence of liabilities 0.0% -2.0% -4.0% Discrepancy (-:excess financing) 2007/08 Net borrowing (+ deficit) 12 6

7 II. Useful Concepts & Indicators Above the line Non repayable receipts: taxes, profits, and grants Expenditures Below the line Changes to repayable resources: debt, deposits 13 Conventional Fiscal Deficit Indicator: The overall balance Total revenues and grants Total expenditures and net lending = OVERALL BALANCE It reflects the financing needs of the general government, and is called the net borrowing requirement under GFS 2001 It is usually presented in percent of GDP Matters for debt sustainability! 14 7

8 Adjusted overall fiscal balance Overall balance Selected items = ADJUSTED OVERALL BALANCE Often excludes: - Grants - Revenues that are not predictable or out of the government control (e.g. the gas or oil revenue) What type of adjusted overall fiscal balance would be useful for Lao PDR? - Depends on purpose - What would we need to do to measure demand impact? 15 What About the Non-Mining Balance? Defined as net lending/borrowing 0.0% minus mining -1.0% revenues -2.0% Why would this be -3.0% useful for Lao PDR? -4.0% (remember lecture -5.0% on natural resource -6.0% management) -7.0% Should we include -8.0% discrepancy? (see -9.0% Figure 1) -10.0% Non-Mining Balance (in % of GDP) Non-mining balance IMF indicative target 2007/

9 Measuring the Demand Impact of Fiscal Policy Change in the non- mining deficit provides rough 5.0% indication of demand 4.0% impact of fiscal policy 3.0% (i.e., rough approximation of 2.0% fiscal impulse in 1.0% Figure 1) 0.0% -1.0% -2.0% -3.0% Change in Non-Mining Deficit (incl. Discrepancy; in % of GDP) + Positive Demand Effect of Fiscal Policy 17 III. Debt Sustainability IMF/World Bank debt sustainability analysis: It s complicated IMF and World Bank see Lao PDR at moderate risk of debt distress Rule of thumb: Debt-to-GDP ratio should be on a declining trajectory (or at least remain stable over time) GDP measures repayment capability of economy Alternatively, consider repayment capacity relative to revenues or exports Lao P.D.R.: External Public Debt Indicators and End-2012 Indicative thresholds End-2012 Present value of debt, as a percent of GDP Exports Revenue Debt service, as a percent of: Exports Revenue Sources: Lao P.D.R. authorities; and IMF and World Bank staff estimates 18 9

10 Debt Dynamics Debt dynamics depend on size of fiscal deficits! In terms of Debt ratios: Nominal GDP growth matters and so do existing debt level and fiscal deficits! What deficit path would Lao PDR need to pursue to lower public debt-to-gdp ratio below 40% by 2020? (See IMF Article IV report, paragraph 14) Exercise 20 10

11 Thank You! This is (almost) everything you need to analyze fiscal developments! 11