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Cover Selected Issues Papers
Author:
Hugo Rojas-Romagosa
Estonia's energy transition, driven by the rapid decline of oil shale generation, faces a trilemma between security, affordability, and decarbonization. Using a structural general-equilibrium framework, this paper evaluates the macroeconomic effects of Estonia's new energy plan, combined with deeper European electricity market integration, EU mitigation policies, the impact of AI-related datacenters and broader electrification pressures. Results show that expanding domestic supply and market integration lowers long-term prices by one-third, increases GDP, reduces import dependence, and supports emissions reduction. Realizing these gains requires phasing out aging oil shale plants, removing barriers to wind power development, expanding battery storage capacity, and strengthening regional coordination.
Keywords:
Estonia; Energy Transition; Renewable Energy; Electricity Market Integration; CGE models
Cover High-Level Summary Technical Assistance Reports
Author:
International Monetary Fund. Fiscal Affairs Dept.
This technical assistance report supports the authorities of Burkina Faso in strengthening fiscal resilience to climate-related disasters through the development of a National Disaster Risk Financing Strategy. Burkina Faso faces infrequent but severe droughts and recurring floods that create significant fiscal pressures and financing gaps during major disaster events. The report assesses disaster risks, financing needs, and existing fiscal and social response mechanisms, while identifying gaps in budgeting, coordination, and data management. It recommends strengthening budget reserves, improving the efficiency of budget preparation and emergency public procurement, enhancing social resilience through digital finance and social registries, and reinforcing the legal and institutional framework to enable a faster, more transparent, and more effective disaster response.
Keywords:
disaster risk; public finances; fiscal policy; financial instruments; climate change
Cover Policy Papers
Author:
International Monetary Fund. Strategy, Policy, & Review Department
This paper proposes a set of reforms to ensure that the IMF–World Bank Debt Sustainability Framework for Low-Income Countries (LIC-DSF) remains fit for purpose and future-proof in the face of heightened debt vulnerabilities, greater heterogeneity across LICs, and analytical advances since the 2017 Review. The proposals aim to enhance the framework’s predictive power, transparency, and policy relevance, while preserving continuity, tractability, and its role as an early-warning tool for debt stress and unsustainable debt.
Cover High-Level Summary Technical Assistance Reports
Author:
International Monetary Fund. Fiscal Affairs Dept.
São Tomé and Príncipe faces a pivotal moment to address its critical power sector challenges. Taking advantage of this, there is window of time to take swift and decisive climate-related actions that could reshape its development trajectory while strengthening the country’s resilience to the long-term implications of climate change, including changing rainfall patterns and sea level rise. Important development needs competing over limited resources and development partner support require a more strategic and integrated approach to mainstreaming climate change into comprehensive and realistic policy planning at the sectoral and the national level. Climate change related challenges call for cross sectoral coordination for land policy, water management, energy access, forest protection, and disaster risk prevention. The mission reviewed the current fiscal policies supporting climate action and provided recommendations to support the long-term climate resilience in São Tomé and Principe, while aligning with its overall development objectives.
Keywords:
climate policy; fiscal policy; climate adaptation; climate mitigation; disaster risk management
Cover High-Level Summary Technical Assistance Reports
Author:
International Monetary Fund. Fiscal Affairs Dept.
The Gambia faces rising fiscal risks from recurrent droughts, floods, and storms, which increasingly strain its limited fiscal space and heavily exposed sectors such as agriculture and tourism. While recent efforts to improve data systems and disaster risk financing have strengthened preparedness, fragmented risk assessments, inconsistent loss data, and weak PFM practices continue to undermine effective planning. Disaster related liabilities could reach up to 2.3 percent of GDP for a 50-year event, and events like the 2022 floods have already caused economic losses. Existing contingency instruments offer only partial protection, leaving frequent shocks to trigger costly ad hoc responses. Strengthening fiscal resilience will require better disaster loss data, improved macro fiscal analysis, more disciplined budgeting, and strategic use of risk layering approaches to integrate disaster risk into fiscal planning.
Keywords:
Disaster risks; fiscal risks; public finance; fiscal policy; financial instruments; climate change
Cover Selected Issues Papers
Authors:
Maximiliano Appendino
,
Pablo Alonso
, and
Emanuel Kopp
Paraguay’s financial system is bank dominated and currently liquid, profitable, and well capitalized. Credit growth has been strong in recent years—outpacing regional peers—in the context of robust economic activity. While it has moderated more recently, consumer credit continues to expand more rapidly, supported by digitalization, strong economic activity, and greater financial inclusion. Although NPLs remain close to historical lows, this raises questions about potential vulnerabilities, especially if combined with other shocks, such as droughts. For instance, in 2019 and 2022, Paraguay experienced two droughts, which coincided with periods of flat economic growth, owing to their negative impact on agricultural and hydroelectric production, as well as river navigation. The particularly severe drought in 2022 reduced agricultural output by 33.6 percent in the first half of the year and was followed by a significant increase in NPLs over the subsequent year. To examine these questions, this paper uses a macro financial modeling tool developed by the IMF Institute for Capacity Development customized for the case of Paraguay. Staff considered two shock scenarios: a drought calibrated to the experiences in 2019 and 2022, and an asset quality deterioration in addition to the endogenous deterioration due to the drought. The results suggest that Paraguay’s financial system is resilient to these scenarios, with buffers sufficient to sustain the provision of credit—and thereby supporting economic growth—even under combined shocks. However, more severe shock combinations could generate amplification effects, including as banks’ efforts to rebuild buffers would be associated with tighter financial conditions. These findings underscore the importance of close supervisory monitoring and strengthening the supervision of climate-related risks. Development of the macroprudential policy toolkit, especially of borrower-based tools (e.g., DSTI limits), would also increase the room of maneuver to contain vulnerabilities from the expansion of consumer credit.
Keywords:
Paraguay; macro-financial modeling; financial stability; credit growth; banking sector resilience; climate shocks; drought risk; macroprudential policy
Cover High-Level Summary Technical Assistance Reports
Author:
International Monetary Fund. Fiscal Affairs Dept.
This report provides a diagnostic assessment of Uganda’s climate policy framework, focusing on adaptation and mitigation strategies, institutional capacity, and climate finance. The findings highlight significant progress in policy formulation, yet identify gaps in implementation, data management, and interagency coordination. Recommendations include strengthening policy coherence, enhancing fiscal measures to incentivize climate mitigation, adaptation and green investment, and improving access to climate finance. The report also emphasizes the importance of capacity building and institutional reforms to support effective climate action. These measures aim to bolster Uganda’s resilience and ensure the sustainability of its climate-related initiatives within a robust fiscal policy framework.
Keywords:
climate policy; fiscal policy; climate adaptation; climate mitigation; climate finance
Cover High-Level Summary Technical Assistance Reports
Author:
International Monetary Fund. Fiscal Affairs Dept.
Disasters pose macro critical fiscal risks to Pakistan, with average annual losses from floods estimated at about 1 percent of GDP and severe events generating large financing needs of several percentage points of GDP. While existing budgetary mechanisms are generally sufficient for immediate disaster response, recovery and reconstruction costs create significant macro fiscal pressures and risk crowding out development spending. Strengthening disaster risk reduction, integrating disaster risks into macro fiscal planning and debt sustainability analysis, and improving federal–provincial coordination are essential to enhance fiscal resilience. A rules based cost sharing framework, better use of social protection systems, and carefully designed financial sector interventions would help contain future fiscal liabilities and safeguard long term growth.
Keywords:
Disaster risks; public finance; fiscal policy; financial instruments
Cover High-Level Summary Technical Assistance Reports
Author:
International Monetary Fund. Fiscal Affairs Dept.
Developing a Disaster Risk Financing Strategy (DRFS) presents a strategic opportunity for Egypt to advance key Vision 2030 priorities, including macroeconomic stability, fiscal consolidation, strengthened medium term planning, expanded social protection, and enhanced climate resilience. Egypt’s disaster risk profile—characterized by frequent but localized floods and storms, rare yet severe earthquakes, and intensifying climate hazards—creates financing needs that rise sharply for high impact events, potentially exceeding available fiscal buffers at critical moments. While the general contingency reserve provides flexibility, competing demands, low insurance penetration, and strong public expectations of government support expose the budget to implicit contingent liabilities. Egypt has made important progress in fiscal risk management, social protection reform, and institutional coordination, yet gaps remain in ex ante planning, data, and standardized protocols. A well designed DRFS can integrate fiscal policy, social resilience, financial sector instruments, and institutional reforms to shift from ad hoc post disaster responses toward a more predictable, efficient, and fiscally sustainable approach to managing disaster risks.
Keywords:
Disaster risks; public finance; fiscal policy; financial instruments; climate change
Cover IMF Working Papers
Authors:
Hippolyte W. Balima
,
Colombe Ladreit
,
Andresa Helena Lagerborg
,
Flavien Moreau
,
Andrea F Presbitero
, and
Evgenia Weaver
This paper studies the macroeconomic dynamics of conflicts and post-conflict recovery using a newly assembled global dataset covering 194 countries, including 170 conflict onsets and 158 conflict terminations, over the period 1946–2024. Using a local-projection difference-in-differences framework complemented by geocoded firm-level evidence, we trace the evolution of macroeconomic aggregates around conflict onset and termination. We make four contributions. First, output losses from conflicts typically exceed those associated with banking, currency, and sovereign debt crises, as well as severe natural disasters. Second, external-sector dynamics constitute a central mechanism through which wars amplify macroeconomic challenges, despite policymakers’ efforts to contain the war shock. Third, post-conflict recoveries are slow and uneven and depend critically on the durability of peace: conflict resumption stalls recovery prospects, while sustained peace produces only gradual recoveries relative to wartime losses. These recoveries are typically labor-led, while capital accumulation and productivity remain subdued. Fourth, firm-level evidence confirms this labor-led recovery and points to persistent financial constraints that hinder capital rebuilding during the postconflict period.
Keywords:
wars; macroeconomy; macroeconomic policy; economic recovery