According to ADB documents, the proposed TA subproject will advance knowledge and policy insights and build technical capacity on fiscal policies to support green and inclusive development advancing economic, social, and environmental objectives in developing Asia. The Economic Research and Regional Cooperation Department (ERCD), in collaboration with leading experts will carry out research , and findings will be disseminated to policymakers and other stakeholders. The project closely aligns with ADB's Strategy 2030 on ADB's role in enhancing DRM and improving public expenditure effectiveness. By addressing the funding and provision of public goods and services, the subproject contributes to the ADB vision of a prosperous, inclusive, resilient, and sustainable Asia and the Pacific. The TA is also aligned with the Sustainable Development Goals. The proposed TA is included in the current Management-approved annual work program of ERCD.
The cluster TA will have the following outcome: knowledge on strengthening revenue mobilization, public expenditure effectiveness, and fiscal management enhanced.
Subproject 1 will contribute to the cluster TA’s overall outcome by producing knowledge products that provide a platform for an improved understanding of the fiscal landscape in developing member countries (DMCs), including the potential impact of the coronavirus disease (COVID-19) pandemic, and how revenue mobilization can be strengthened to contribute to green and inclusive development. The TA will produce the following outputs to help DMCs across the region address a range of core fiscal policy challenges as they emerge from the pandemic. At least seven research studies will be produced, each providing an in-depth analysis of specific aspects of fiscal policy design and challenges in developing Asia, with a focus on strengthening tax revenues. Together, these studies will provide a fresh knowledge base on pertinent fiscal challenges in DMCs.
PROJECT RATIONALE AND LINKAGE TO COUNTRY/REGIONAL STRATEGY
Inefficient and inadequate taxes and government expenditures in developing member countries (DMCs) hinder the provision of education, health, social protection, and physical infrastructure needed to promote green and inclusive development. The United Nations Economic and Social Commission for Asia and the Pacific estimates the region needs to invest $1.5 trillion annually from 2016 to 2030 to achieve SDGs. While private finance is crucial, much of this expenditure must be met by stronger tax revenue. Inadequate taxes also impede the effectiveness of counter-cyclical fiscal policy and increase reliance on costly finance. An inefficient tax mix can increase reliance on more distortive and growth retarding taxes; worsen income distribution; and work against environmental and social policy objectives.
The COVID-19 pandemic has exacerbated fiscal pressures, with revenues falling sharply across the region due to the economic downturn and stimulus measures. Combined with higher spending, fiscal deficits have widened considerably. While fiscal pressures should ease as economies emerge from the pandemic, the economic outlook remains uncertain and government balance sheets may remain weak for some time.
Fiscal policy is one of the most politically challenging areas of public policy. Increasing taxes or reducing public spending can be unpopular, and fiscal policy reforms in the broader interests of society can be stymied by vested interests. Successful fiscal policy reform, therefore, requires strong political buy-in. Knowledge products that provide fresh evidence on the benefits of fiscal policy reforms and the impact of alternative and timely policy options can play an important role in supporting policy reform dialogue and mobilizing political support for reform.
Fiscal policy for green and inclusive development better leveraged.
|Responsible ADB Officer||Hill, Samuel C.|
|Responsible ADB Department||Economic Research and Regional Cooperation Department|
|Responsible ADB Division||Office of the Chief Economist, ERD|
|Executing Agencies||Asian Development Bank
6 ADB Avenue,
Mandaluyong City 1550, Philippines
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