Latest news with #ArticleIV
Reuters
2 days ago
- Business
- Reuters
IMF projects Brazil will grow 2.3% this year, inflation to converge to target in 2027
BRASILIA, June 3 (Reuters) - Brazil's economy is expected to grow 2.3% this year, the International Monetary Fund (IMF) projected on Tuesday, revising up its April forecast of 2%. Following the conclusion of its 2025 Article IV visit to the country, the IMF estimated that inflation will reach 5.2% this year, from 5.3% seen previously, gradually converging to the 3% target by the end of 2027.
Business Times
28-05-2025
- Business
- Business Times
IMF warns UK to keep budget in check or risk market revolt
[BRUSSELS] UK Chancellor of the Exchequer Rachel Reeves must stick to her fiscal rules and keep spending under control or risk a market backlash that undermines the government's economic plans, the International Monetary Fund warned. In its Article IV annual health check of the economy, the world's economic supervisor told Reeves that any additional spending, such as proposals to reverse cuts to winter-fuel subsidies for pensioners or ending the two-child benefit limit, will need to be covered by other savings or tax rises. The government needs 'to stay the course and deliver the planned deficit reduction over the next five years to stabilise net debt and reduce vulnerability to gilt market pressures,' the fund said. Global trade uncertainty and market shocks could yet derail the outlook, it added. 'Materialisation of these risks could result in market pressures, put debt on an upward path, and make it harder to meet the fiscal rules, given limited headroom.' The IMF proposed 'additional revenue or expenditure measures as needed if shocks arise.' Its recommendations come ahead of the June 11 Spending Review, when Reeves will set budget limits for government departments for the next three years. She fixed the envelope in March but left just £9.9 billion (S$17.2 billion) of headroom against her main fiscal rule that taxes must cover day-to-day spending by the end of the parliament, one of the smallest margins on record. Reeves has already experienced the reaction of gilt markets to any hint of fiscal laxity at a time when the national debt is close to 100 per cent of gross domestic product. Her big-borrowing budget in October drove up debt costs, more than wiping out her fiscal buffer as yields on long-end debt soared to a 27-year high. Reeves was forced to slash spending in the March Spring Statement to repair the damage. Pressure on the public purse has mounted in recent days. The government has promised to unwind the cut to winter fuel payments, which would cost up to £1.8 billion, and is considering raising the two-child cap on benefits, potentially costing another £2.5 billion amid growing calls from within the ruling Labour Party to relax its self-imposed budget limits. Prime Minister Keir Starmer is not ruling out any policy to ease child poverty, his spokesman Dave Pares told reporters on Tuesday, but insisted the government views the fiscal rules as vital and non-negotiable. 'One of the elements why there is intense focus on headroom is because headroom is not very high,' said Luc Eyraud, the IMF's UK mission chief. 'To reduce the reactivity of short-term policy to the concept of headroom, the first solution should be to have higher headroom.' BLOOMBERG
Iraq Business
20-05-2025
- Business
- Iraq Business
IMF publishes Iraq Recommendations
By John Lee. A team from the International Monetary Fund (IMF) has concluded a visit with Iraqi officials, concluding: Economic Challenges: Iraq faces a highly uncertain global environment, declining oil prices, and acute financing pressures, which are harming economic activity and deepening existing vulnerabilities. Iraq faces a highly uncertain global environment, declining oil prices, and acute financing pressures, which are harming economic activity and deepening existing vulnerabilities. Urgent Measures Needed: Contain the fiscal deficit by increasing non-oil tax revenues and controlling the public wage bill. Complete the restructuring of state-owned banks. Promote private sector growth through labour market reform, improved business environment, better governance, and anti-corruption efforts. Central Bank Role: The Central Bank of Iraq (CBI) should continue: Modernizing the banking system. Supporting private banks in expanding correspondent banking relationships. The Central Bank of Iraq (CBI) should continue: Recent Progress: There has been recent progress noted in financial sector reforms, though further steps are encouraged. Full statement from the International Monetary Fund: An International Monetary Fund (IMF) mission, led by Mr. Jean-Guillaume Poulain, met with the Iraqi authorities in Amman and Baghdad during May 4-13 to conduct the 2025 Article IV consultation. The following statement was issued at the end of the mission: A highly uncertain global environment, falling oil prices, and acute financing pressures, are taking a toll on economic activity and exacerbating Iraq's existing vulnerabilities, calling for urgent measures to preserve fiscal and external stability. These include containing the fiscal deficit by mobilizing non-oil tax revenues and reining in the public wage bill, completing the restructuring of state-owned banks, and promoting private sector growth, by reforming the labor market, improving the business environment, enhancing governance and fighting corruption. Building on recent progress, the Central Bank of Iraq (CBI) should continue modernizing the banking system and supporting private banks in expanding their corresponding banking relationships. Recent Economic Developments, Outlook and Risks The non-oil sector grew at a slower pace last year and inflation remained subdued. Following a very strong growth of 13.8 percent in 2023, Iraq's non-oil GDP is expected to have considerably moderated to 2.5 percent in 2024, driven by a slowdown in public investment and in the services sector, as well as a weaker trade balance. The agriculture, manufacturing, and construction sectors remained resilient, benefiting from post-drought recovery, expanded refining capacity, and strong growth in credit to households. The decline in oil production weighed on overall growth, which contracted by 2.3 percent for the year. Inflation dropped to 2.7 percent by end-2024, amid lower food price inflation and liquidity absorption from the CBI. The fiscal position has deteriorated, along with external balances. The 2024 fiscal deficit is estimated at 4.2 percent of GDP, compared to 1.1 percent in 2023, reflecting rising spending on wages and salaries and energy purchases. Financing constraints have led to reemergence of arrears notably in energy and capital expenditure. On the external front, the current account surplus narrowed sharply from 7.5 percent to 2 percent of GDP, due to a surge in goods imports. Nonetheless, external buffers remain strong, with reserves at US$100.3 billion at end-2024-covering over 12 months of imports. Non-oil growth is projected to remain subdued in 2025 amid a challenging global environment and financing constraints. Non-oil GDP is projected to slow down to 1 percent this year as the impact of falling oil prices and financing constraints weigh on government spending and consumer sentiment. The current account is expected to weaken considerably in 2025 primarily due to declining oil export revenues. The deterioration in the external position is projected to weigh on foreign reserves. Policy Priorities Iraq's vulnerabilities have increased in recent years due to a large fiscal expansion. Beside weighing on prospects of private sector-led growth, current public employment policies and resulting wage costs are unsustainable given Iraq's low non-oil tax base. Accordingly, dependence on oil revenues has worsened, and the oil price required to balance the budget increased to around $84 in 2024, up from $54 in 2020. These challenges have been exacerbated by the sharp decline in oil prices in 2025, requiring an urgent policy response. In the very short-term, the authorities should review current and capital spending plans for 2025 and limit or postpone all non-essential expenditure. At the same time, there may be scope to increase non-oil revenues by revising customs duties as well as introducing or raising excise taxes. The authorities should also explore options to diversify the creditors base for increasing financing availability. Monetary financing of the deficit should be avoided as it could fuel inflation, drain FX reserves, and weaken the CBI's balance sheet. More broadly, a sizable fiscal consolidation is needed to mitigate macro-fiscal risks, ensure debt sustainability, and rebuild fiscal buffers. On the revenue side, besides customs duties and excise taxes, there is scope to gradually reform personal income tax by limiting exemptions and increasing rates. Strengthening tax administration-through digitalization, improved enforcement, and better collection-is essential. A more effective tax administration should allow for eventually introducing a general sales tax. On the spending side, curbing current expenditures, particularly via comprehensive wage bill reforms, limiting mandatory hiring, and adopting attrition rule, would yield significant savings. Recent efforts to better target the public distribution system are welcome, but there is scope to further improve targeting and eventually shift to cash-based social safety nets. Finally, it is urgent to reform the public pension system through raising the retirement age and reducing both the accrual and replacement rates is needed to enhance its sustainability. Implementing these reforms would also create fiscal space to increase capital spending. Expanding non-oil investment, especially in trade and transportation infrastructure should help economic diversification. Substantial investments are also required to modernize the electricity sector and develop natural gas resources, both of which are essential for improving energy security and reducing dependence on gas imports. Improved procurement, public financial management, and corruption control would enhance the effectiveness of any additional public investment. Further efforts are needed to mop up excess liquidity in order to improve monetary policy transmission. While the CBI has made progress in absorbing excess liquidity, additional adjustments could enhance the effectiveness of the framework. Key measures include increasing the issuance of CB-bills, focusing on the short maturity (14-day) at the policy rate, revising size limits on individual banks' bids, and improving liquidity forecasting tools and practices. To safeguard its balance sheet and preserve credibility, the CBI should continue to avoid financing the government deficit. The mission commended the CBI for the successful transition to the new trade finance system. Trade finance is now fully processed by commercial banks through their correspondent banking relationships. This has also supported the recent decline in the spread between the official and parallel market exchange rates. Nonetheless, further efforts are needed to further reduce the spread, including by imposing Iraqi dinar usage for car and real estate transactions, improving customs controls to curb smuggling, and simplifying FX access. While initial steps to reform state-owned banks are encouraging, broader efforts are needed to strengthen the financial sector. The restructuring plan for state-owned banks should be finalized without delay, encompassing treatment of non-performing loans, and recapitalization needs. In parallel, the mission welcomed progress in digitalization and the authorities' intention to undertake a comprehensive banking sector overhaul. Reforms should include enhancing corporate governance, digital infrastructure, and cybersecurity, while promoting a stronger role for private banks. Efforts to enhance AML/CFT measures by tackling the deficiencies identified in the MENAFATF Mutual Evaluation report should continue. Chronic power shortages, electricity losses and excessive tariff subsidization continue to weigh on the economy. Addressing inefficiencies in the electricity sector is important for fiscal sustainability and improving productivity. In 2024, distribution losses reached 55 percent, driven by theft and illegal connections, leading to significant financial losses. The authorities are deploying smart meters and have introduced other measures to enhance billing and collection. However, progress should be accelerated. Once collection substantially improves, achieving cost recovery will also require electricity tariff increases, with carefully calibrated subsidies targeted to low-income users. Recent disruptions in electricity imports from Iran further underscore the need for diversified supply and the development of gas projects. Combating corruption and governance weaknesses is imperative to support economic development. Steps taken in the implementation and upgrade of the national anticorruption strategy and the improvements in corruption perception indices are positive developments. However, corruption remains a significant hurdle for growth. Strengthening accountability frameworks for the operation of state-owned and private enterprises in the oil, electricity and construction sectors is critical, and thorough compliance with Extractives Industries Transparency Initiative standards and the enactment of the law on Transparency and Access to Information should be prioritized. Additionally, aligning anticorruption legal frameworks with international covenants and best practice, and strengthening the independence of the judiciary are essential for effective enforcement and for the protection of economic rights. A comprehensive structural reform agenda is essential to unlock growth potential. The mission estimates that a comprehensive set of reforms covering the labor market, business regulation, the financial sector and governance could double non-oil potential GDP growth over the medium term. On labor market, priorities include increasing labor force participation, particularly among women, by improving female education and further reducing barriers to their work and mobility, and reforming public sector hiring, which distort labor markets and reduce productivity. Efforts to better align skills with labor market needs should intensify. More generally, simplifying regulations and reducing bureaucratic impediments in e.g. business registration or tax administration should increase participation in the formal economy and help private sector development. The mission would like to thank the Iraqi authorities and various stakeholders for their excellent hospitality and cooperation and candid discussions during the mission. (Source: IMF)
Epoch Times
01-05-2025
- Business
- Epoch Times
A Tax Man With Convictions and Courage
Commentary Have you ever heard of someone so principled that he quit his job rather than do something he knew to be wrong? I admire people of such integrity. We need more of them. Let me tell you about one whose story is especially relevant on April 15, the date the federal government demands we meet our income tax obligations. This man was head of the IRS. His name was T. Coleman Andrews. Born in Virginia in 1899, Andrews possessed a head for numbers. He loved accounting, an affection which I personally could never understand. Accounting baffled and frustrated me during my undergraduate days; I scraped by with a 'C.' I agree with whoever described an accountant as 'someone who solves a problem you did not know you had in a way you don't understand.' Andrews was not only good at it, but he also founded several successful accounting firms and worked in high accounting positions for the Commonwealth of Virginia, the U.S. State Department, and the General Accounting Office in Washington. In 1953, President Dwight Eisenhower appointed him Commissioner of the Bureau of Internal Revenue. In an interview while still new in the job, Andrews said that he would insist that every employee engage taxpayers with 'a sincere desire to be helpful,' but he promised to come down hard on anybody caught cheating on his taxes. Related Stories 4/17/2025 3/23/2025 Andrews moved to simplify complex tax forms. He changed the Bureau's name to what we know today—the Internal Revenue Service. He adopted numerous measures to improve efficiency, but when Congress overhauled tax law in 1955, he realized how 'unreformable' the system was. Isaac William Martin, in his 2013 book titled 'Rich People's Movements,' quotes Andrews as lamenting that the congressmen who wrote the bill 'do not themselves know what they mean.' Barely two years into his tenure on the inside, Andrews abruptly resigned. His views on the agency and the income tax had evolved. Andrews was one of those rare public servants who 'grew in office.' He could no longer hold a position that put him at odds with his conscience. He came to see the IRS and the tax code as oppressive, incomprehensible, and corrupt. Shortly after his departure from the IRS, he issued a statement explaining his position: 'Congress went beyond merely enacting an income tax law and repealed Article IV of the Bill of Rights, by empowering the tax collector to do the very things from which that article says we were to be secure. It opened up our homes, our papers and our effects to the prying eyes of government agents and set the stage for searches of our books and vaults and for inquiries into our private affairs whenever the tax men might decide, even though there might not be any justification beyond mere cynical suspicion. 'The income tax is bad because it has robbed you and me of the guarantee of privacy and the respect for our property that were given to us in Article IV of the Bill of Rights. This invasion is absolute and complete as far as the amount of tax that can be assessed is concerned. Please remember that under the Sixteenth Amendment, Congress can take 100 percent of our income anytime it wants to. As a matter of fact, right now it is imposing a tax as high as 91 percent. This is downright confiscation and cannot be defended on any other grounds. 'The income tax is bad because it was conceived in class hatred, is an instrument of vengeance and plays right into the hands of the communists. It employs the vicious communist principle of taking from each according to his accumulation of the fruits of his labor and giving to others according to their needs, regardless of whether those needs are the result of indolence or lack of pride, self-respect, personal dignity or other attributes of men. 'The income tax is fulfilling the Marxist prophecy that the surest way to destroy a capitalist society is by steeply graduated taxes on income and heavy levies upon the estates of people when they die. 'As matters now stand, if our children make the most of their capabilities and training, they will have to give most of it to the tax collector and so become slaves of the government. People cannot pull themselves up by the bootstraps anymore because the tax collector gets the boots and the straps as well.' Clearly, this was a guy who didn't allow power or a paycheck to turn either his brain or his spine into jelly. Agree with him or not, you must admit there's some impressive personal character there. Andrews continued to speak out against the income tax and the ever-bigger government it was financing. In 1956, he even ran for President of the United States on a third-party ticket—a campaign that, controversially, was built around a states' rights platform. While some saw it as a principled stance for limited government, others rightly noted its alignment with political figures and movements that defended segregation. He died in 1983 at the age of 84. The school in my native state of Pennsylvania where I struggled in that accounting class more than a half-century ago is Grove City College. In researching this article, I was proud to learn that in 1963, GCC bestowed an honorary doctorate upon T. Coleman Andrews. What Andrews had to say may not be much consolation to you this tax season. Perhaps it will be of at least small comfort, however, to know that we once had an IRS Commissioner who saw the harm of the whole business and possessed the courage of his convictions to wash his hands of it. Additional Reading: ' ' ' ' ' ' From the Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
Yahoo
30-04-2025
- Business
- Yahoo
Explainer-Why did the IMF block Colombia's access to a credit line?
By Rodrigo Campos, Nelson Bocanegra NEW YORK/BOGOTA (Reuters) -The International Monetary Fund said on Saturday it had set conditions for Colombia's access to its $8.1-billion Flexible Credit Line, a precautionary tool for crisis prevention and mitigation, effectively cutting access for the country from that cash. Colombia had access to a similar tool since 2009, but only made use of it once in 2020 when the pandemic wreaked havoc on the global economy. But the IMF move shines a fresh light on the country's fiscal issues, which have been troubling financial markets for months. Analysts said the implication of losing the FCL access was a rise in borrowing costs, which was already seen in an April 15 Eurobond offering. WHAT IS AN FCL? The FCL is a fund program that requires the applicant country to have strong economic fundamentals and institutions, and a willingness to keep both. It can last for one or two years and has no preconditions once triggered. To qualify for continued access to the program, a government needs a "very positive assessment of the country's policies" in a yearly visit by the IMF to check on policy and economic direction - internally called an Article IV Consultation, according to the fund's website. Countries should also follow criteria that include a track record of capital market access at favorable terms, have low and stable inflation, and data transparency. WHAT IS COLOMBIA'S FCL? The IMF approved Colombia's current FCL in April 2024. The South American country has had access to that type of program since 2009, tapping it once in 2020 with a then $5.4-billion draw to cover budget needs during the pandemic. Colombia's current $8.1-billion FCL was approved to replace the 2022 one. Bogota said it would treat the arrangement as "precautionary," meaning it does not expect to draw unless there is an unforeseen situation. WHY WAS COLOMBIA'S ACCESS CONDITIONAL? The two-year arrangement requires an Article IV visit that results in a report followed by a midterm review to make sure access to the facility remains uninterrupted. However, Colombia did not finalize an Article IV report with the fund. In visits to Bogota in mid-February and early April, engagement has been "close," according to the IMF. Between those visits, German Avila was sworn in as new finance minister. His predecessor resigned after three months amid clashes over budget cuts, and hours after a labor reform championed by President Gustavo Petro was rejected by lawmakers. "Engagement continues as the authorities work on plans to reduce the fiscal deficit this year and going forward," an April 18 IMF staff statement said, adding the government was working on the policies underpinning projected revenue gains and necessary spending adjustments to meet the overall fiscal deficit target. The government announced this year it would cut its 2025 budget by 12 trillion pesos ($2.85 billion) to 511 trillion pesos, but an independent office said this month an additional adjustment of some 46 trillion pesos ($11 billion) is needed to meet the fiscal rule. While the government said it had complied with the fiscal rule last year citing technicalities, analysts and experts said that was not the case. WHAT NEXT? The IMF and Colombia remain engaged in Article IV consultations but until those are completed, there will not be an FCL midterm review. It is unclear whether Colombia's fragile fiscal situation would allow it to pass the review. Colombia's spreads to comparable U.S. debt have widened some 100 basis points to nearly 400 bps over the past 12 months, sharply underperforming regional peers Chile and Peru. Its $3.8-billion offering this month yielded a 7.5% coupon on the five-year debt and 8.75% for 10-year, both considered high. Colombia's midterm fiscal framework, a roadmap for the country's indebtedness for this year and next, must be published by the government by mid-June.
