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Countries where social and political institutions stimulate interpersonal trust, civic cooperation, and social cohesiveness tend to have more efficient governments, better governance systems, and faster growth. This paper provides cross-country evidence, based on a sample of developing and developed countries, that fiscal decentralization—the assignment of expenditure functions and revenue sources to lower levels of government—can boost social capital and therefore be integrated into second-generation reforms.

Macroeconomics --- Public Finance --- State and Local Borrowing --- Intergovernmental Relations --- Federalism --- Secession --- Fiscal Policy --- National Government Expenditures and Related Policies: General --- Taxation, Subsidies, and Revenue: General --- Debt --- Debt Management --- Sovereign Debt --- Public finance & taxation --- Fiscal federalism --- Expenditure --- Macro-fiscal analysis --- Revenue administration --- Public debt --- Fiscal policy --- Expenditures, Public --- Revenue --- Debts, Public --- United States

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This paper analyzes Botswana's medium-term fiscal sustainability in view of the expected depletion of diamonds in the future. The analysis shows that in the absence of policy adjustments, Botswana's current fiscal policy strategy is unsustainable over the longer term, which could endanger macroeconomic stability and Botswana's reputation as Africa's success story. Ensuring medium-term sustainability of Botswana's public finances requires stronger revenue collection, through improved revenue administration, greater tax enforcement, and the rationalization of tax exemptions in order to realize the full revenue potential. Opportunities also exist to generate more revenue from the non-mining sector through changes in the tax regime. At the same time, the government needs to maximize the effectiveness of public expenditure and bring down public spending to levels that are more in line with long-term revenue prospects. A greater control over the public sector wage bill is critically important. In-house capacity for macroeconomic monitoring and fiscal analysis also needs to be enhanced further. Looking ahead, growth of a dynamic non-mining sector is crucial for Botswana not only from the fiscal sustainability point of view, but from the point of view of achieving balanced development that will create jobs and deliver durable reduction in poverty and inequality. Fiscal policy will have to play a central role in this process.

Access to Finance --- Debt Markets --- Economic Theory & Research --- Finance and Financial Sector Development --- Fiscal Analysis --- Fiscal Policy --- Fiscal Sustainability --- Long-Term Instruments --- Macroeconomic Stability --- Macroeconomics and Economic Growth --- Medium-Term Projection --- Public Finances --- Public Sector --- Public Sector Development --- Public Sector Economics --- Public Sector Expenditure Policy --- Revenue Policy --- Taxation

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How do policy communications on future f iscal targets af fect market expectations and beliefs about the future conduct of f iscal policy? In this paper, we develop indicators of f iscal credibility that quantify the degree to which policy announcements anchor expectations, based on the deviation of private expectations f rom official targets, for 41 countries. We find that policy announcements partly re-anchor expectations and that f iscal rules and strong fiscal institutions, as well as a good policy track record, contribute to magnifying this effect, thereby improving fiscal credibility. Conversely, empirical analysis suggests that markets reward credibility with more favorable sovereign financing conditions.

Macroeconomics --- Economics: General --- Public Finance --- Budgeting --- Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General --- Fiscal Policy --- Studies of Particular Policy Episodes --- Structure, Scope, and Performance of Government --- Fiscal Policies and Behavior of Economic Agents: General --- National Budget --- Budget Systems --- Economic & financial crises & disasters --- Economics of specific sectors --- Budgeting & financial management --- Fiscal policy --- Fiscal rules --- Budget planning and preparation --- Public financial management (PFM) --- Fiscal stance --- Macro-fiscal analysis --- Currency crises --- Informal sector --- Economics --- Budget --- Spain

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This manual introduces key concepts and methodology used by the Fiscal Affairs Department (FAD) in its fiscal analysis of resource industries (FARI) framework. Proper evaluation of fiscal regimes for extractive industries (EI) requires economic and financial analysis at the project level, and FARI is an analytical tool that allows such fiscal regime design and evaluation. The FARI framework has been primarily used in FAD’s advisory work on fiscal regime design: it supports calibration of fiscal parameters, sensitivity analysis, and international comparisons. In parallel to that, FARI has also evolved into a revenue forecasting tool, allowing IMF economists and government officials to estimate the composition and timing of expected revenue streams from the EI sector, analyze revenue management issues (including quantification of fiscal rules), and better integrate the EI sector in the country macroeconomic frameworks. Looking forward, the model presents a useful tool for revenue administration practitioners, allowing them to compare actual, realized revenues with model results in tax gap analysis.

Investments: Energy --- Money and Monetary Policy --- Public Finance --- Taxation --- Corporate Taxation --- Banks and Banking --- Fiscal Policy --- Taxation, Subsidies, and Revenue: General --- Business Taxes and Subsidies --- Mining, Extraction, and Refining: Hydrocarbon Fuels --- Mining, Extraction, and Refining: Other Nonrenewable Resources --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Energy: General --- Interest Rates: Determination, Term Structure, and Effects --- Monetary economics --- Investment & securities --- Public finance & taxation --- Corporate & business tax --- Finance --- Currencies --- Oil --- Corporate income tax --- Fiscal Analysis of Resource Industries (FARI) --- Resource rent tax --- Money --- Commodities --- Taxes --- Discount rates --- Financial services --- Revenue performance assessment --- Petroleum industry and trade --- Corporations --- Revenue --- Discount --- United States