Posted on March 19, 2014 by iMFdirect
By Sanjeev Gupta and Michael Keen
(Version in Español, Français, Русский, 中文 and 日本語)
These are difficult times for ministers of finance. Fiscal constraints are tight and raising economic growth a priority. At the same time, income inequality is on the rise, and so is public pressure for governments to do something about it through their tax and spending policies. What’s a minister to do? How can he or she meet these seemingly incompatible demands?
A new IMF paper provides some guidance. Governments, of course, will have their own equity objectives. What the paper aims to do is look at precisely how countries can achieve their distributional goals—whatever they are—at the least possible cost to (and maybe even increasing) economic efficiency. This can help achieve sustainable growth and, in many cases, lead to fiscal savings. An earlier study by IMF researchers found that on average, fiscal redistribution has been associated with higher growth, because it helps reduce inequality.
Filed under: Advanced Economies, Economic research, Employment, Fiscal policy, IMF, Inequality, International Monetary Fund | Tagged: developing economies, education, government spending, health, income distribution, income inequality, inequality, pension, property taxes, retirement, taxes | 1 Comment »
Posted on April 6, 2012 by iMFdirect
By Mauricio Soto
We’re all getting older, and there’s no doubt that pension reform is a hot topic in the advanced economies. But it’s also critical in emerging economies.
Our analysis here at the IMF shows that across emerging economies pension spending is projected to rise as the population ages. On average, these spending increases are not that large. But reforms are needed to increase coverage of the system without making pension systems financially unsustainable over the long term.
In emerging Europe, we’ve seen how pension spending has increased from 7½ to 9 percent of GDP over the past two decades. Spending also increased rapidly in other emerging economies—albeit from much lower levels—going from 2 to 3 percent of GDP over the same period. It seems the relatively low spending in emerging economies outside Europe reflects relatively low coverage (generally only those in the formal sector are eligible) and younger populations.
Populations are aging rapidly in the emerging economies. As illustrated in Chart 1, a rather grim picture is developing where we see that the ratio of elderly to working population will more than double in the next four decades. In the future, there will be many more retirees consuming what fewer workers will produce.
Filed under: Africa, Emerging Markets, Europe, Finance, growth, Inequality, Latin America, Middle East, Public debt | Tagged: Asia, Bulgaria, Chile, Estonia, Hungary, pensions, Poland, retirement, spending | 11 Comments »
Posted on February 1, 2012 by iMFdirect
By Benedict Clements
Indiana Jones, the fictional character of the namesake movies, once said “It’s not the years, it’s the mileage.” This quote comes to mind as many advanced economies wrestle with pension reform and the best way to ensure both retirees and governments don’t go broke.
Our view, explained in a new study, is that the years do matter.
Our analysis shows that gradually raising retirement ages could help countries contain increases in pension spending and boost economic growth. Further cuts in pension benefits, or raising payroll contributions, are also options countries could consider, although many countries will find many advantages in raising retirement ages.
The challenge is to reform pension systems without hurting their ability to provide income security for the elderly and prevent old-age poverty. Continue reading
Filed under: Advanced Economies, Economic Crisis, Employment, Fiscal policy, IMF, International Monetary Fund, Public debt | Tagged: advanced economies, demographics, economic growth, fiscal policy, GDP, government debts, government deficits, IMF, Indiana Jones, International Monetary Fund, pension reform, pension spending, pensions, productivity, retirees, retirement, taxes | 3 Comments »