Market Reforms and Public Debt Dynamics in Emerging Market and Developing Economies

Download or read book Market Reforms and Public Debt Dynamics in Emerging Market and Developing Economies written by Mr. Zamid Aligishiev and published by International Monetary Fund. This book was released on 2023-09-12 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: Many emerging market and developing economies face a difficult trade-off between economic support and fiscal sustainability. Market-oriented structural reforms ease this trade-off by promoting economic growth and strengthening public finances. The empirical analysis in this note, based on 62 EMDEs over 1973-2014, shows that reforms are associated with sizeable and long-lasting reductions in the debt-to-GDP ratio mainly through higher fiscal revenues and lower borrowing costs. These effects are larger in countries with greater tax efficiency, lower informality, and higher initial debt. Moreover, a model-based analysis elaborates on how such fiscal gains can be enhanced when revenue windfalls associated with reforms are saved or channeled through higher public investment.