Emerging markets, low-income developing countries need $3 tln to provide public services: IMF

Doaa A.Moneim , Thursday 1 Apr 2021

Improving spending efficiency in such economies heavily depends on strengthening public financial management frameworks and would help governments deliver better outcomes with the same resources, according to the report

File Photo: The International Monetary Fund (IMF) logo is seen outside the headquarters building in Washington, U.S.,taken on September 4, 2018. REUTERS

Meeting the “access to basic services”, which is one of the sustainable development goals, by 2030 in 121 emerging markets requires $3 trillion, according to the International Monetary Fund (IMF).

In chapter 2 of its Fiscal Monitor report, which was released on Thursday, the IMF said low-income developing countries need about 10 to 50 percent of the $3 trillion to meet the same goal.

The report said that emerging markets and low-income developing countries are witnessing weak spending efficiency driven by four key factors, including weak public investment and social spending governance, poor allocation for education and health care resources, inequality, and limited institutions.

Improving spending efficiency in such economies heavily depends on strengthening public financial management frameworks and would help governments deliver better outcomes with the same resources and galvanise public support for spending, according to the report.


“The COVID-19 pandemic has derailed implementation of the SDGs, and there is a need for strong national ownership to prioritise the SDGs agenda and improve spending efficiency, and for the international community to provide additional support through grants, concessional financing, and, in some cases, debt relief,” the report detailed.

It added that public spending on education, health care, and infrastructure can improve access to basic services and human capital accumulation, as well as compensate for the gap in private investments in children between rich and poor parents.

On the other hand, the report pointed to the global estimates that expect an increase of 95 million people to be in extreme poverty in 2020, relative to the pre–COVID-19 projections.


Strengthening tax capacity in the post pandemic world will be crucial for advanced and developing economies alike to meet large spending needs created by the pandemic, according to the report.

It is also imperative for countries to strength revenue administrations, including through better governance and digitalisation — especially in emerging market economies and low-income developing countries.

The report estimated that reforming tax policy could raise additional revenues through opting into various tax reforms to raise additional revenue from income, property, and consumption taxes.

Additionally, international cooperation and agreement on effective minimum corporate taxation can help curb further tax competition and allow countries to maintain higher levels and reduce tax expenditures, according to the report.

The report highlighted the pandemic’s severe impacts regarding exacerbating pre-existing inequalities in incomes and access to basic public services, such as health care and vaccination, both within and across countries.


“Disruptions to education threaten social mobility by leaving long-lasting effects on children and youth, especially those from poorer households. These challenges are being compounded by accelerated digitalisation and the transformational effect of the pandemic on the economy, posing low skilled workers with difficulties in finding employment,” the report explained.

“Against this backdrop, societies may experience rising polarisation, erosion of trust in government, or social unrest. These factors complicate sound economic policymaking and pose risks to macroeconomic stability and the functioning of society.” 

The IMF and the World Bank Group's spring meetings are expected to kick off officially on 5 April. 

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