Oh Haiti

Jared Diamond's Haiti story

One Island, Two Worlds

Why is Haiti so poor?

Too Small to Fail: Developing Haiti’s Economy

The Help That Haiti Needs

Country Without a Net

Macro-Modelling for Poor Countries- case of Mali

Going over Mali's Poverty Reduction Strategy Paper's I came over the following under 'Capacity building in macro-economic modelling and analysis';

-Preparation of micro-simulation model (MEGC) for analysis of impacts of exogenous shocks and policy measures on poverty and income distribution (World Bank financing)

-Macro-sectoral forecasts model, as tool for analysis of growth-oriented sectors.

For Comment: How much economic modelling is required before you can reduce poverty?

Related;

The country's budget planning gets an 'A' according to one rating;

Mali’s MTEF had the top “A” rating in its 2004 HIPC tracking exercise (question 7). However, a more recent assessment finds inadequate integration among the many tools developed to support reforms, including the MTEF, the sector MTEFs, the macroeconomic framework, the new budget nomenclatures, and the multi-year investment program. Timetables of the different exercises aren’t properly synchronized. Sector MTEFs are prepared mainly to satisfy donors, and are separate from the program budget process.

Promises from the latest Letter of Intent;

Mali is vulnerable to external or natural exogenous shocks. Without the fiscal space to respond rapidly to ad hoc demands, there is a risk that macroeconomic stability and the development program will be undermined. The Government considers that in the mediumterm, a zero basic balance is the most appropriate budget target for responding to emergent needs. In 2008 the deficit in the basic balance should be 1.9 percent of GDP, compared with 1.1 percent in 2007, reflecting the budgetary impact of the terms of trade. The aim is to reduce the deficit to 1 percent of GDP in 2009 and achieve balance in 2010. In order to respect the programming of expenditure to reduce poverty, measures have been implemented to correct the downward trend in the tax to GDP ratio observed since 2005....

Improving the quality of public spending remains a top priority. In coordination with our external partners, measures have been included in the Government Action Program for Improving and Modernizing Public Finance (PAGAM-GFP) to respond, among other things, to the conclusions of the Public Expenditure and Financial Accountability (PEFA) exercise. An action plan incorporating PEFA measures has been prepared for 2008. Efforts are under way to pursue implementation of the PAGAM-GFP/PEFA action plan, in particular by completing the connection of authorizing officers (ministries, institutions, regions) to the computerized expenditure system; improving the execution rate of programs by devolving parts of the Procurement Office to the regions; reviewing the Procurement Code; shifting gradually all donors from projects to budget support; and putting in place an economic and financial analysis unit to help strengthen the capacities of the Finance Committee of the National Assembly.

Mali - Public expenditure review

Mali- Creating Fiscal Space
Public Expenditure Management in Francophone Africa: A Cross-Country Analysis

Development of the cities of Mali : Challenges and priorities

Mali budget calendar

• Ministry review of budget-programmes
• Preparation of macro-fiscal framework as part of the Medium Term Budget Framework (MTBF)
• Preparation of Budget Circular (including ceilings and donors disbursement projections)
• Preparation by sector ministries of draft annual budget estimates, including the detailed budget-programmes, on the basis of sector expenditure ceilings in line with the CBMTMEF review of ministries’ budget requests, including the budget-programmes
• Budget negotiations and finalisation of draft Budget d’Etat
• Adoption of draft Budget by Council of Ministers
• Government submits the draft Budget d’Etat to the National Assembly
• Examination and adoption of the Loi de Finances by the National Assembly

Doing business 2008 Mali

Mauritius Economic Update

Recently from the Fund;

Mauritius: 2008 Article IV Consultation-Staff Report

Mauritius: Selected Issues

I'm waiting to see Fazeer's comments on the IMF's review.

World Economic Outlook Update

Policymakers face a difficult environment. They need to head off rising inflationary pressure, while also being mindful of downside risks to growth.

Many central banks have tightened monetary policy stances but interest rates in emerging and developing economies generally remain negative in real terms, particularly in countries where exchange rate management has limited monetary policy flexibility.

The risk of second-round effects from the surge in commodities prices and continued stress in financial markets complicates the response to the slowdown, particularly in advanced economies. The case for policy tightening in these economies is stronger than before the recent oil price increase but still not established, given that inflation expectations and labor costs are projected to remain well anchored and growth momentum is weak. However, inflationary pressures need to be monitored closely. In many emerging economies, particularly those that continue to operate above trend growth, monetary policy needs to be tightened combined with greater fiscal restraint and, in some cases, with more flexible exchange rate management, in order to reverse the recent build-up in inflation.

-Global slowdown and rising inflation

It is good in Down Under

Four year net policy decisions included in each Budget and Growth in government operating expenses


A new architecture for infrastructure


Corporate tax rates in Australia and the OECD 2008

Making provision for future priorities

IMF gives an A+ to Australia's economic management;

10. Fiscal policy focused on medium-term sustainability has delivered a sequence of surpluses that has eliminated commonwealth net debt. This leaves Australia with a strong fiscal position, an enviable situation by international standards. We support the strategy in the latest budget to save the revenue windfall from the commodity driven boom and thereby allow automatic stabilizers to support monetary policy. Saving some of the revenue from the commodity price boom in three new funds will take pressure off monetary policy in the near term and enable increased infrastructure investment over the medium term.

11. The reduction in public spending growth in the latest budget illustrates the government's commitment to help reduce inflation. With the upside risks to the outlook for inflation, more public spending restraint could be required and we encourage the authorities to identify areas where additional spending cuts could be implemented. In addition, positive revenue surprises should be saved to assist monetary policy until it is clear that inflation will decline. Given the uncertainty about how much of the increase in commodity prices will be permanent, saving the additional revenue in the near-term may avoid sharp changes in taxes and spending in the future.

12. The states have increased capital spending and their budget balance has shifted to a small deficit in aggregate, thereby adding stimulus to the economy. This highlights the importance of maintaining restraint at the commonwealth level.

13. To the extent that the improvement in the budget balance is structural, associated with permanently higher commodity prices, this should provide scope to reduce taxes or increase spending over the medium term. The governments' intention to achieve a positive balance over the medium term should increase public net worth, further strengthening the fiscal position. Our analysis suggests that a combination of lower labor and capital income taxes, along with increased public investment, will generate the largest economic gains. The gains from other options such as lower consumption taxes or higher public consumption are not as large. Despite the expected structural improvement in the medium term, significant long-term fiscal challenges remain, particularly in the area of healthcare spending, and early adjustments will be key to preserving fiscal sustainability.

Have African Economies Turned Around?

African Economic Outlook 2008- OECD

Sub-Saharan Africa: Private Capital Fueling Growth

Have African Economies Turned Around?

Turkey and IMF

IMF`s Last Review of Turkey`s 3-Year Stand-By Arrangement

Turkey -- Letter of Intent, April 28, 2008

Guess the following oil producing country

The economy contracted during the first half of 2007. This was driven by a drop in oil production following a strong outturn in 2006, reflecting cutbacks to optimize oil field utilization as well as ongoing facilities maintenance. The government and private nonenergy sector, on the other hand, provided a positive impetus to growth benefiting from energy-related income spillovers.

Inflation is subdued and credit growth has only recently picked up. Inflation remains low at 0.1 percent (year-on-year) through the first nine months of 2007, partly due to price controls and declining prices on clothing and recreation. Credit growth rose by around 5 percent in the first half of 2007 following a contraction in 2006, reflecting base effects and more broad-based credit expansion. Although nonperforming loans (NPLs) in the banking sector remain high, these mostly relate to credit losses incurred in the late 1990s following financial problems in the corporate sector; provisioning appears broadly adequate and the generation of new NPLs is low. Moreover, local banks' capital adequacy ratios remain high at close to 20 percent.

High oil and gas prices continue to drive large fiscal and current account surpluses. As in the past, energy-related revenue windfalls are being largely saved and invested abroad. The primary fiscal surplus reached 21½ percent of GDP in FY2006/07 (April-March) as oil and gas revenues remained very high. The current account surplus reached 56 percent of GDP in 2006 for the most part reflecting high nominal energy exports.

Growth will remain weak in the near term, but recover over the medium-term. Output is projected to slow to around ½ percent in 2007 and decline fractionally in 2008 due to extensive oil sector facilities upgrading as well as the maturation of oil fields; nonenergy private growth is expected to remain solid. The main risk to the near-term outlook is a global slowdown leading to lower energy prices. Over the medium term, growth is expected to recover and reach around 3 percent as oil production returns to current levels, with new and upgraded facilities coming on stream, and government capital spending is stepped up with improved implementation. There are upside risks to this outlook related to possible new hydrocarbon discoveries.

Branding

Brand Names Before the Industrial Revolution;

In medieval Europe, manufacturers sold durable goods to anonymous consumers in distant markets, this essay argues, by making products with conspicuous characteristics. Examples of these unique, observable traits included cloth of distinctive colors, fabric with unmistakable weaves, and pewter that resonated at a particular pitch. These attributes identified merchandise because consumers could observe them readily, but counterfeiters could copy them only at great cost, if at all. Conspicuous characteristics fulfilled many of the functions that patents, trademarks, and brand names do today. The words that referred to products with conspicuous characteristics served as brand names in the Middle Ages. Data drawn from an array of industries corroborates this conjecture. The abundance of evidence suggests that conspicuous characteristics played a key role in the expansion of manufacturing before the Industrial Revolution.

Related;

Links on Turkish Economy

Turkish Economy in Crisis

Turkish Economy Blog

Turkey and the IMF

Economics of Inflation & Disinflation

Turkey Economy Watch

Turkey- Oxford Business Group

Turkey- Roubini

A Nation In Waiting for the death of a Dictator

Stock-taking Syrian economic refroms

Does Transparency Pay?

Does Transparency Pay?
Rachel Glennerster and Yongseok Shin

Abstract: This paper studies whether transparency (measured by accuracy and frequency of macroeconomic information released to the public) leads to lower borrowing costs in sovereign bond markets. We analyze the data generated during 1999–2002 when the International Monetary Fund (IMF) instituted new ways for countries to increase their transparency—by publishing the IMF’s assessment of their policies and committing to release more accurate data more frequently. The IMF’s preexisting internal timetable for country reports introduced exogenous variation when countries were faced with the option to become more transparent. We exploit this time variation and construct instruments to estimate the impact of transparency on bond yields in a way that is free from endogeneity bias. We find that countries experience a statistically significant decline in borrowing costs (11 percent reduction in credit spreads on average) when they choose to become more transparent. The magnitude of the decline is inversely related to the initial level of transparency and the size of the debt market.

Financial tail wagging the economic dog

Need a summary of IMF's latest WEO- listen to this interview with Simon Johnson.

Related;

QUESTION: I remember sitting here a year ago and you saying that you did not think that the financial tail would wag the economic dog. Now, today, you are saying that the world faces a one-in-four chance of a recession. How are we to know that you are not being overly pessimistic this year while you were being overly optimistic last year?

MR. JOHNSON: Well, I think that is a fair question. I think that we make a forecast and any forecast can be wrong; most forecasts presumably are wrong. We are giving you an honest assessment of how we see the world today.

I think that everyone has learned a great deal about financial dogs and their tails, and how exactly those worked over the past year. So, on the basis of what we know today, this is our best forecast. Do ask me again next year about how we have done.

Demand Contingent Plans against tail risks from your governments

Finally, in conclusion, I would like to say that my blog at IMF.org is again up and running. Please invite your readers and listeners to ask questions or post comments there. To make things a little more interesting, while I have been speaking, I have put up a post regarding what I regard as the key messages from this morning's discussions. Thank you very much.

Finally, let me comment briefly on some policy implications of this global assessment. A key message is that, with continuing tensions and uncertainties prevailing in global markets, policymakers in both advanced and emerging economies need to respond to a potentially quickly changing balance of risks. In addition, in our view, now is the time when prudent governments will draw up contingent plans to guard against deeper "tail risks."

Priority must be given to containing financial disruptions in a durable manner. As was discussed at yesterday's press conference on our Global Financial Stability Report, a key focus must continue to be recognizing losses quickly and rebuilding financial capital.

Macroeconomic policies can play a complementary role in supporting demand and limiting the negative interaction between financial markets and the real economy.

Monetary policy remains the first line of defense. Central banks in several advanced economies, notably the United states, have appropriately eased policy rates as their growth outlooks have worsened, and may need to continue easing until their economies find a firmer footing. In the Euro Area, current inflation remains uncomfortably high, but we expect that inflation will come down over the relevant roughly two-year policy horizon in the context of slower growth. This should provide some room for future policy easing on the part of the European Central Bank.

Fiscal policy is the second line of defense. The U.S. fiscal stimulus, for example, looks likely to provide timely support in the second half of this year. However, the use of fiscal space, where available, should be temporary and not jeopardize efforts aimed at consolidating public finances over the medium term.

Given the risk of negative interplay between housing and credit markets, the so-called third line of defense—namely, the use of public sector balance sheets—may be needed to support housing and financial markets.

In the United States, steps have already been taken to ensure the availability of mortgage financing and to stem systemic risk, but more may be needed before financial and housing markets find completely stable ground.

We also cannot ignore the international aspects of the current financial crisis. Given the cross-border dimensions of exposures and counterparty risks, solutions implemented in national silos may not be adequate to resolving an underlying global problem of capital adequacy in the financial system.

In many emerging and developing economies, the challenge remains to manage inflation and overheating risks, but it will be important to respond flexibly if global downside risks intensify.

Finally, as a way to reduce global pressure on food and energy prices, more open trade policies in those products would be a good start. Less insular biofuels policy in advanced economies would help relieve some pressure. At the same time, we encourage countries to avoid raising taxes or imposing quotas on their food exports. These reduce incentives for domestic producers and also increase international prices.

Related;
IMF puts cost of credit crisis at $945bn

World Economic Outlook

Global Economic Prospects 2008/2009 according to Michael Mussa, Peterson Institute

Watch the video of the event.

World Economic Outlook- from IMF coming out April 9.

An Extra-ordinary East Asia Economic Update

World Bank has release the update;

Economic outlooks are always uncertain, to be sure, but the level of uncertainty about prospects for the world economy just now is extraordinary. That matters in a region as highly globally integrated as East Asia. Forecasts for the US economy have been sliding lower for months but what’s less clear is how deep and protracted the downturn will be – underlying which are uncertainties about how much more widespread and intense the global financial turmoil that began last August will get.

See the data slide show

How is Singapore's economy doing

IMF's annual health check on the Singapore economy is out;

IMF's view: Large net fiscal reserves resulting from past prudence provide scope over the medium term to meet social needs associated with rising income inequality and aging without compromising fiscal sustainability. A further deepening of structural reforms will be key to sustaining robust growth. While the financial system is sound, risks from increasing integration with international financial markets should be closely monitored and managed to maintain the stability and growth of the financial sector. With inflation expectations well anchored, there is no compelling reason to change the current monetary policy stance of targeting a modest and gradual appreciation of the nominal effective exchange rate at this moment. Nevertheless, if large capital inflows persist, the MAS should refrain from sterilization. This would discourage such inflows, easing the need for foreign exchange intervention. The large current account surplus at present can be mainly explained by structural and cyclical factors, but its ratio to GDP is expected to decline gradually over time as private investment continues to recover and the rapid aging of the population lowers national savings. The real effective exchange rate is likely to appreciate gradually as part of this process.

Government's view: The authorities broadly agreed with the staff’s assessment and policy recommendations. Notwithstanding their concerns about stagnant wages of low-skilled workers, they reiterated their view that work is the best form of welfare but did not rule out the possibility of further strengthening the social safety net. Proactive structural reform aimed at sustaining growth would continue, including promoting high value added sectors, encouraging research and development, and strengthening human capital. Safeguarding financial sector growth and stability is crucial to Singapore’s heightened role as a global financial sector. The authorities saw no need to adjust liquidity management (sterilization). They emphasized that money market operations are aimed at maintaining adequate liquidity in the banking system and that interest rates are not their monetary policy instrument. Within the exchange rate centered framework, interest rates could adjust on market expectations of the future path of the Singapore dollar without any shift in the MAS’ liquidity management.

Related;
Monetary Policy Operations in Singapore

Singapore's Exchange Rate Policy

Equilibrium Exchange Rates and Exchange Rate Forecasting
Professor Ronald MacDonald

The Foreign Exchange Origins of Japan's Economic Slump and Low Interest Liquidity Trap
Professor Ronald McKinnon

"Free Trade Agreements - An Economic Policy tool for Singapore in a Globalized World" by Teo Ming Kian, Executive Chairman of the Economic Development Board,

Iran- can economy become an opposition?

Government subsidising bakeries in Egypt

It looks like Mubarak faces a new opposition- it's the economy.


What does the IMF say?- Egypt: Reforms Trigger Economic Growth

With Egypt's labor force growing rapidly, sustained growth that produces jobs will be essential. This will require sustained higher investment. Structural reforms therefore need to continue to tackle constraints on business development, such as inadequate infrastructure, red tape, poor public service delivery, and the scarcity of skilled labor.

To improve access to finance, particularly for smaller firms, the authorities aim to rapidly complete the bank recapitalization and restructuring program and further improve banking supervision. Complementary regulatory and judicial reforms—such as setting up specialized economic courts and enhancing the role of the private sector-led credit bureau—should help improve contract enforcement and creditor protection. These steps will facilitate bank lending to smaller enterprises.

The authorities have also started to tackle the underpricing of energy. They hiked diesel prices in mid-2004; further adjusted retail prices in mid-2006; and, in late 2007, launched a three-year program to phase out most industrial energy subsidies.

However, prices for most energy products are still far below international prices. This distortion could attract investment into sectors where Egypt does not have a long-run comparative advantage. It also encourages levels of energy consumption that impose high environmental costs and uses up public funds that could be spent more productively, for example on education or infrastructure.