IMF Weekend Read

 

Dear MARIA,   In today's edition, we highlight: Oil Prices Tax Reforms in Greece Digital Infrastructure Capital Flows OIL PRICES How to Respond to the Energy Price Shock The recent energy price spike has left governments in a bind: shield people and businesses while straining already tight public budgets—or let prices rise for everyone and risk social and political backlash. What can be done?   In a new blog, Pierre‑Olivier Gourinchas, head of the IMF’s Research Department, and Rodrigo Valdés, head of the Fiscal Affairs Department, highlight the risk of policy missteps. Poorly designed measures, they warn, are costly and counterproductive because they can fuel inflation, worsen fiscal fragilities, or push global energy prices even higher.   Instead, fiscal support should be temporary, targeted, timely, and tailored. Let domestic prices reflect international costs so that scarce energy is used efficiently. Shield vulnerable households—which spend much more of their income on energy and food—with targeted, temporary assistance. Support viable small businesses with liquidity, not price controls. And reserve generalized subsidies and price caps for truly exceptional shocks.   The directors also warn of negative spillovers: when larger or richer countries suppress energy‑price signals at home, global demand rises, international prices increase, and shortages worsen—hurting poorer importing countries the most. Read the IMF blog TAX REFORMS Greece's Tax Reforms Enabled Economic Recovery Greece was once a cautionary tale—shut out of markets, reliant on external financial support, and collecting too little tax to finance essential services and support growth. Today, it is one of only five European Union countries running a primary budget surplus.   Given its stronger fundamentals, the country is now better placed to weather external shocks, according to the IMF’s latest annual health check of the Greek economy.   This remarkable turnaround reflects, in no small part, a transformed tax administration. Greece’s tax‑to‑GDP ratio reached 28 percent in 2025, up from 20.5 percent in 2009. Sustained reforms—supported by IMF capacity development—were critical, broadening the tax base, strengthening enforcement, and increasing trust in the system.   Though in some ways unique, Greece’s experience offers a valuable and widely applicable lesson. Recent IMF analysis highlights two core insights: governments cannot deliver on their fiscal reform goals unless taxation is fair, credible, and transparent; and building these capabilities takes time. Read the analysis F&D MAGAZINE Why Digital Public Infrastructure Matters Finance ministries should treat core digital systems as economic plumbing, not scattered IT projects. A government would never build a dozen roads between the same two places, yet that is effectively what happens with many digital services, Diane Coyle, David Eaves, and Beatriz Vasconcellos write in the IMF’s Finance & Development magazine.   Countries spend billions on IT without recognizing the need for shared digital infrastructure, leading to fragmented systems that make it harder to share data across public agencies and with the private sector.   “What if we treated a set of core digital systems—such as digital IDs, payments, data exchange platforms, credentials, and other shared services that drive core functions across government and the economy—the same way we treat roads or power grids?” the authors ask, arguing for interoperable “digital rails” governed for public value, not just short‑term cost savings. Read the story HIGHLIGHTS FROM THE SPRING MEETINGS New IMF Index Shows How Reforms Can Build Stable Capital Flows Countries can shape not just how much capital flows across their borders, but what kind—tilting toward more stable finance rather than treating liberalization as an on/off switch.   Drawing on a new FinOpen index, IMF economists Tobias Kranke and Wenjie Li show how countries can open an “equity tap” and a “debt tap” separately, and how sequencing these choices matters for resilience. Their research, covering 118 countries over three decades, finds that greater openness to equity is associated with a higher equity share in foreign liabilities, while greater openness to debt typically increases debt exposure.   The FinOpen index, which spans 193 countries through 2022, captures the intensity of capital controls on a 0–4 scale and distinguishes inflows from outflows and equity from debt—revealing gradual, step‑by‑step liberalization paths that older binary measures largely miss. Watch the Analytical Corner video Thank you very much for your interest in the Weekend Read! Be sure to let us know what issues and trends we should have on our radar.  Jacqueline Deslauriers Editor | IMF Weekend Read  jdeslauriers@imf.org Stay connected with the International Monetary Fund:       This email was sent to politikimx@gmail.com on behalf of: International Monetary Fund 1900 Pennsylvania Ave NW · Washington, DC · 20431