Transcript The PRGF/PSI, Fiscal Space and Financing for

The PRGF/PSI, Fiscal Space and
Financing for Development
A focus on Africa: Trends, Prospects, and
Challenges
October 11, 2008
Dan Ghura
Jan Kees Martijn
International Monetary Fund
PRGF/PSI Support for Development
Spending
Programs help create fiscal space:
 Full use of aid over time
 Explain to donors the scope for using higher aid
 Support domestic revenue mobilization
 Develop domestic and foreign borrowing strategies
that keep debt sustainable
 Help development of financial markets to channel
savings to public and private sector
NB. Monetary financing is not a sustainable source of
fiscal space
PRGF/PSI Support for Development
Spending (cont’d)
Programs support effective expenditure
management:
 Promote medium-term budgeting
 Smooth spending despite aid volatility
 Increase budgetary transparency
 Monitor social spending
 Use wage bill-ceilings only as a temporary
measure in exceptional cases
PRGF and PSI
PRGF


Provides concessional balance of payments
support
To build track record for HIPC/MDRI debt relief
PSI



For mature stabilizers
Signal to donors
Possible financial support in case of shocks
(ESF)
Figure 1. Real GDP Growth and Inflation
14
12
14 35
Growth
12
10
30
30
25
25
10
Mozambique
8
8
6
6
4
4
2
Cameroon 2
15
0
10
Rwanda
0
-2
-4
35
Inflation
20
-6
-4
-6
2000 2001 2002 2003 2004 2005 2006 2007
Sources: WEO, WETA, and staff estimates
15
Mozambique
10
Rwanda
-2
Malawi
20
Malawi
5
Cameroon 5
0
0
2000 2001 2002 2003 2004 2005 2006 2007
Figure 2. Government Capital Expenditure
(In percent of GDP)
16
16
14
14
12
12
Mozambique
10
10
Rwanda
8
8
6
6
4
4
Malawi
Cameroon
2
0
2
0
2000
2001
2002
2003
Sources: WEO, WETA, and staff estimates
2004
2005
2006
2007