The COVID-19 pandemic had a very large impact on government finances. As governments saw their revenues reduced and their expenditures increased to cope with the health and social emergencies, the public debt rapidly mounted. By the end of 2020, the debt-to-GDP ratios had increased by 10 percentage points (pp) compared to pre pandemic levels in the average emerging … [Read more...] about How Do Inflation Shocks Affect Public Debt Dynamics?
Are Latin American and Caribbean Countries Complying with Their Fiscal Rules?
Over the past two decades, a growing number of Latin American and Caribbean (LAC) countries began adopting fiscal rules to limit overspending influenced by election cycles, public pressure, and other political economy factors, helping the region strengthen its fiscal solvency and sustainability. However, in recent years the region has suffered several external shocks that … [Read more...] about Are Latin American and Caribbean Countries Complying with Their Fiscal Rules?
The Fiscal Puzzle of the Ukraine War for Latin America and the Caribbean
The war in Ukraine has produced a significant increase in energy costs that will likely delay the fiscal consolidation efforts already put in place by several governments in the region. This supply shock is also likely to fuel inflation and higher interest rates, adding further pressure on governments trying to service their debts. Higher domestic and global inflation has … [Read more...] about The Fiscal Puzzle of the Ukraine War for Latin America and the Caribbean
How can tax policy promote investment in the post-pandemic period?
Promoting private investment -both foreign and domestic – must be the cornerstone of any pro-growth fiscal policy in the post-pandemic period. Governments in Latin America and the Caribbean (LAC) must ensure that the design and implementation of such policies – which usually involve the use of tax incentives – protect tax revenues and attract the type of investment that can … [Read more...] about How can tax policy promote investment in the post-pandemic period?
Latin American and Caribbean countries must adopt a pro-growth fiscal strategy to avoid falling into a debt trap
With the outbreak of the pandemic, fiscal balances in Latin America and the Caribbean (LAC) deteriorated and public debt increased significantly. When combined with the expected slowness of economic recovery, this will put significant pressure on the sustainability of public finances for countries in the region. Given this scenario, these countries urgently need to develop and … [Read more...] about Latin American and Caribbean countries must adopt a pro-growth fiscal strategy to avoid falling into a debt trap