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Books and Analytical Papers > Departmental Papers

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Cover Departmental Papers
Europe’s Fiscal Squeeze: Tackling Rising Spending Pressures
Luc Eyraud
,
Mahika Gandhi
,
Andrew Hodge
,
Giacomo Magistretti
,
Ian C. Stuart
,
Mengxue Wang
, and
Jiae Yoo
European countries face rising spending pressures and higher interest costs that could sharply increase debt and threaten growth if left unaddressed. The paper argues that maintaining fiscal sustainability requires a coordinated strategy combining structural reforms and fiscal consolidation, and in some cases deeper changes to the role of government, as incremental approaches are no longer sufficient
Keywords:
Aging; Climate; Data from European Union; Defense spending; Demographics; EU budget; EU climate goal; EU country; EU financing; Europe; Fiscal institutions; Fiscal policy; Health; Increase EU resilience; Inefficient spending; Long-term spending pressure; Member states; Pension spending; Pensions; Priority spending needs; Public debt; Spending needs; Spending pressure; Structural reforms
Cover Departmental Papers
Strengthening GCC-CCA Economic Cooperation
Said A Bakhache
,
Francois Painchaud
,
Hoda Assem
,
Muayad Ismail
,
Jeong Dae Lee
,
Nasir H Rao
,
Alejandro Simone
,
Haytem Troug
,
Jarin Tasnim Nashin
, and
Nihal Haider
Heightened global uncertainty, geoeconomic fragmentation, and trade tensions have made deepening economic ties more important to boost growth and resilience. While economic ties between countries of the Gulf Cooperation Council (GCC) and the Caucasus and Central Asia (CCA) are still limited, deliberate policy actions could help expand and diversify trade and investment. This paper focuses on cross-cutting policies, which would benefit GCC-CCA bilateral economic ties and beyond.
Keywords:
Economic Integration; Trade; Financial Development; Gravity Model; and Non-Tariff Measures
Cover Departmental Papers
Rethinking Fiscal Policy and Frameworks in the Caucasus and Central Asia
Masud Al Taj
,
Nazim Belhocine
,
Alejandro Hajdenberg
, and
Iva Petrova
This paper evaluates the fiscal frameworks in the CCA and finds significant scope to strengthen fiscal policy along its stabilization, allocation, and sustainability dimensions. Priorities include enhancing automatic stabilizers through reforms to personal income taxation and social protection systems; refining fiscal rules to better accommodate cyclical conditions and strengthen enforcement; and anchoring fiscal planning in credible medium-term expenditure and fiscal frameworks underpinned by realistic macro-fiscal projections. Reinforcing fiscal risk management—including risks associated with state-owned enterprises (SOEs), public-private partnerships (PPPs), financial sector vulnerabilities, and climate-related shocks—will also be increasingly important for safeguarding fiscal space. Improvements in transparency, specifically on fiscal reporting and the coverage of quasi-fiscal activities would strengthen accountability and help policymakers better assess underlying fiscal positions, supporting more effective prioritization and resource allocation. The successful implementation of these reforms would require sustained political commitment, coordinated capacity development, and sustained engagement with international partners. By modernizing fiscal institutions and grounding policy in transparent, forward-looking frameworks, CCA countries can strengthen the countercyclical role of fiscal policy, support private-sector development, and enhance resilience to future shocks. Taken together, these reforms would help the region sustain higher, more inclusive growth and make progress further on its economic transition path.
Keywords:
Fiscal Policy; Fiscal Frameworks; Fiscal Stabilization; Fiscal Risk Management; Fiscal Sustainability; Fiscal Rules; Cca country; Cca countries' spending; fiscal policy effectiveness; State spending; IMF team; Fiscal risks; Fiscal governance; Central Asia; Eastern Europe; Central and Eastern Europe; Asia and Pacific; Europe
Cover Departmental Papers
Central Bank Independence and Monetary Policy Effectiveness in the Middle East, Central Asia and Caucasus
Dmitry Gershenson
,
Omer Faruk Akbal
,
Mohamed Belkhir
,
Rhea Gupta
,
Koba Gvenetadze
,
Ashraf Khan
,
Fei Liu
,
Antonio Manzanera
,
Nasir H Rao
,
Umang Rawat
,
Xiaoqiao Shen
, and
Subir Lall
The subject of central bank independence (CBI) remains a keenly debated topic even decades into its adoption in a growing number of countries. CBI has recently come under renewed scrutiny, including in the Middle East and Central Asia (ME&CA) countries, as pressures for monetary policy to accommodate fiscal needs have intensified. To better inform the debate around CBI, this paper provides the first comprehensive analysis of its role in managing inflation including when subject to shocks, a key indicator on the effectiveness of monetary policies, in ME&CA countries using a novel data set and country deep dives. It further identifies institutional strengths and weaknesses of CBI in ME&CA countries and offers tailored policy recommendations to strengthen CBI.
Keywords:
central bank independence; inflation; monetary policy; macroeconomic resilience; Middle East; Central Asia and Caucasus; cbi reform; IMF team; cbi Subindices; inflation outcome; cbi momentum; cbi reference; IMF tool; Central bank autonomy; Monetary policy frameworks; Central bank legislation; Central bank organization; Price stabilization; Central Asia; Middle East and Central Asia; Asia and Pacific; North Africa
Cover Departmental Papers
ISORA 2023: Tax Administration: Performance and Practices
William Joseph Crandall
,
Elizabeth Gavin
,
Zhaoqing Liu
,
Andrew R Masters
, and
Poorva Navalgundkar
This paper presents a broad analysis of the International Survey on Revenue Administration (ISORA) 2023, which collected detailed data from 166 tax administrations worldwide for fiscal year (FY) 2022. It is the first survey since FY 2017 to cover tax administration practices and structural foundations extensively, providing valuable insights into global tax administration performance, resources, and governance frameworks. The paper also provides contextual information about the survey, to aid interpretation and facilitate use of the comparative database.
Keywords:
Tax administration core functions; tax administration performance; tax administration resources; comparative data; International Survey on Revenue Administration (ISORA); Isora data; governance framework; fiscal year; performance indicator; Isora Index; tax administration efficiency; pay as you earn; Isora participation; third-party data; Personal income tax; Corporate income tax; Value-added tax; Middle East; Central Asia; Sub-Saharan Africa; Global
Cover Departmental Papers
Anchoring Inflation Expectations: Evidence from Latin America during the Post-COVID Stress Test
Philip Barrett
,
Federico Duenas
,
Christopher Evans
,
Eric Huang
,
Gonzalo Huertas
, and
Tannous Kass-Hanna
This paper examines the anchoring of long-run inflation expectations in Latin America during the post-COVID inflation surge. Monetary frameworks—many established around the turn of the century—generally performed well, with long-run beliefs moving little despite large shocks. Over the last 20 years, both tails of the expectations distribution have converged toward targets, though an upside skew persists. Cross-sectional patterns are consistent with personally credible policymakers operating within frameworks subject to institutional constraints. Using new data on anchoring, we show that stronger anchoring mitigates the inflationary impact of external shocks, while the effects on monetary transmission are mixed but consistent with theory. We also document that credibility evolves asymmetrically: hawkish monetary policy surprises deliver modest improvements, whereas dovish shocks erode anchoring more rapidly. Narrative case studies illustrate how steps toward inflation targeting can succeed in anchoring expectations even in crises, provided institutional and political support remains strong.
Keywords:
Inflation; Expectations; Anchoring; Latin America; Beliefs; Forecasts; Monetary Policy; inflation expectation; Policy conduct; inflation in Latin America; IMF Library; measurement composition of inflation; Inflation targeting; Exchange rates; Consumer price indexes; Exchange rate arrangements; Caribbean; South America; Central America; Western Hemisphere
Cover Departmental Papers
Budget Credibility in Sub-Saharan Africa
Pablo Lopez Murphy
,
Can Sever
,
Felix F. Simione
, and
Qianqian Zhang
This paper analyses budget credibility in Sub-Saharan Africa, where fiscal plans frequently diverge from execution. Using a new dataset covering 39 countries during 2021–24, it documents persistent deficit overruns driven by optimistic revenue forecasts, overruns in current spending, and systematic under-execution of capital expenditure. The paper shows that deviations are shaped by structural features, financing volatility, institutional quality, and political cycles. Countries with stronger fiscal institutions and IMF-supported programs tend to exhibit smaller and less volatile deviations. The findings highlight the macroeconomic and governance costs of weak budget credibility and point to policy priorities, including more realistic forecasting, stronger expenditure controls, improved cash management, and institutional reforms to better align budgets with outcomes.
Keywords:
budget credibility; public financial management; Sub-Saharan Africa; midyear budget revision; budget deviation; government budget; budget plan; Current spending; Government debt management; Africa; Global
Cover Departmental Papers
The “Safe” in the Financial Safety Net: Building Robust Deposit Insurance Systems
Atilla Arda
,
Marc C Dobler
,
Peter Mugisa
,
Jan Nolte
, and
David C. Parker
The paper updates IMF staff views on deposit insurance policy issues, which were last comprehensively addressed in 2006 before the global financial crisis and prior to the international standard. Effective deposit insurance systems must be integrated into the financial safety net, have strong governance arrangements, and adequate funding with a public backstop. Coverage should protect most retail deposits and membership must be mandatory for all banks. Funding targets should be informed by expert judgment, and foreign currency deposits should be insured if widely used. The paper recommends that deposit insurance funds should be available to support the resolution of banks (subject to safeguards), enabling prompt depositor compensation and the continuity of depositor services. It also recommends close coordination with resolution authorities and adopting depositor preference. Key challenges include the need for shorter depositor payout timeframes, the evolution of fintech products, and ensuring credible funding arrangements.
Keywords:
Financial Crises; Financial Institutions and Services; Government Policy and Regulation; Banks; Depository Institutions; Micro Finance Institutions; Mortgages; IMF staff; depositor preference; Monetary and Capital Markets Department; IMF publication; Financial Crisis Preparedness and Management Division; Deposit insurance; Insurance; Financial safety nets; Bank deposits; Financial sector stability; Global; Asia and Pacific
Cover Departmental Papers
StatGPT: AI for Official Statistics
James Tebrake
,
El Bachir Boukherouaa
,
Jeff Danforth
, and
Nivashini Harikrishnan
National statistical systems generate the statistics that underpin policy, economic analysis, and public trust. Yet, despite decades of investment in statistical capacity, two persistent challenges, data accessibility and interpretability, limit the impact of these official statistics. The rise of large language models (LLMs) and GenAI applications such as ChatGPT and Gemini appeared to offer a solution by enabling users to retrieve statistics using natural language. However, testing demonstrates that while the GenAI applications excel at synthesizing text, they perform poorly at delivering official statistics: they frequently provide dangerously “reasonable” but incorrect figures. This paper introduces StatGPT, an initiative by the IMF Statistics Department that leverages LLMs not to generate statistics, but to generate structured queries against APIs of official statistical agencies. StatGPT ensures that users receive the exact published figures, every time, while benefiting from natural language interaction. This paper examines the limitations of off-the-shelf GenAI applications, outlines how StatGPT overcomes these limitations, and proposes a roadmap for making official statistics AI-ready through open data access, enriched metadata standards, and strengthened data governance. By aligning technological innovation with statistical rigor, StatGPT represents a critical step toward a future where official statistics remain authoritative, trusted, and universally accessible in an AI-driven world.
Keywords:
StatGPT; AI-Ready; Official Statistics; Responsible AI; data user; data governance; statistics department; data producer; AI ready; language capability; data accessibility; StatGPT response; government information; Inflation; Consumer price indexes; Labor markets; Population growth; Global
Cover Departmental Papers
Macroeconomic Challenges of Fragility and Policies for Stability and Growth
Alexei Miksjuk
,
Paul M Bisca
,
Jocelyn Boussard
,
John-Paul Fanning
,
Romina Kazandjian
,
Yipei Zhang
,
Lavinia Zhao
,
Thomas Augsten
,
Gaëlle Pierre
,
Björn Rother
, and
Guillaume Chabert
In 2025, fragile and conflict-affected (FCS) included 38 economies that are home to 1 billion people. The recent shocks have intensified fragility-related pressures even in more stable economies. This paper provides a comprehensive discussion of macroeconomic challenges and policies under fragility, expanding on the existing literature and drawing on the implementation of the IMF’s 2022 FCS Strategy. It finds that fragility is associated with slower long-term economic growth amid impaired government functions, including weak public service provision, low tax revenues, and underdeveloped financial sector. In the short term, fragility heightens economies’ vulnerability, with external shocks (such as terms of trade changes) having a stronger and longer-lasting impact. These effects are particularly pronounced in cases when institutional fragility is compounded by conflict or structural characteristics such as fuel export dependence or small country size. The paper argues that strengthening core government functions—macroeconomic stabilization, public service delivery, and market-based resource allocation—is essential to improving macroeconomic performance and addressing fragility, provided institutional and socio-political constraints are accounted for. International financial institutions can support countries’ efforts to mitigate and overcome fragility through tailored policy advice, capacity development, financing, and stronger partnerships with humanitarian, development, and peace organizations.
Keywords:
Fragility; conflict; fragile and conflict-affected states (FCS); macroeconomic shocks; macroeconomic policy; external financing; international support; Fcs warrant; country policy; economic policy; Policy agenda; countercyclical policy response; Fcs economy; Public employment; Global; Sub-Saharan Africa; Caribbean; South America; Central America