Irwin, Timothy Cressey
Fiscal Affairs Department, International Monetary Fund
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Fiscal Affairs Department, International Monetary Fund
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Last updated January 31, 2023
Tim Irwin worked at the World Bank from 1995 to 2008, on among other things the regulation of utilities and the link between public financial management and privately financed infrastructure projects.
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Now showing 1 - 8 of 8
Publication(World Bank, Washington, DC, 2007-03) Easterly, William ; Irwin, Timothy ; Servén, LuisFiscal adjustment becomes like walking up the down escalator when growth-promoting spending is cut so much as to lower growth and thus the present value of future tax revenues to a degree that more than offsets the improvement in the cash deficit. Although short-term cash flows matter, a preponderant focus on them encourages governments to invest too little. Cash flow targets also encourage governments to shift investment spending off budget, by seeking private investment in public projects-irrespective of its real fiscal or economic benefits. To evade the action of cash flow targets, some have suggested excluding from their scope certain investments (such as those undertaken by public enterprises deemed commercial or financed by multilaterals). These stopgap remedies might sometimes help protect investment, but they do not provide a satisfactory solution to the underlying problem. Governments can more effectively reduce the biases created by the focus on short-term cash flows by developing indicators of the long-term fiscal effects of their decisions, including accounting and economic measures of net worth, and where appropriate including such measures in fiscal targets or even fiscal rules, replacing the exclusive focus on liquidity and debt.
Publication(World Bank, Washington, DC, 1997-02) Irwin, TimothyGovernments often regulate not only the overall level of prices charged by infrastructure firms but also the relationship between prices for different services or customers. Prices can differ among different types of customers, even when no customers can be said to be subsidizing another, for example, when one asset is used to supply a service to two or more groups of customers. One of the hurdles that governments must overcome in introducing competition in infrastructure is dealing with the social and political implications of changing price structures, or rate rebalancing. Generally, competition should reduce overall costs in the sector, lessening the need to compensate groups hurt by price increases resulting from rate rebalancing. But if the efficiency gains are not enough to offset the price increases for some groups and the government is worried about the political and social costs of rate balancing, it has three basic options: 1) preserving the old price structure; 2) funding price subsidies from general tax revenue rather than from transfers within the firm or industry; and 3) relying on social safety nets rather than price subsidies. Whichever option a government chooses should stand up against the following four tests: 1) Do subsidies reach the people the government most wants to support? 2) are the costs clear and measurable? 3) Are the administrative costs as low as possible? 4) Is the revenue raised from the source that entails the least cost to the economy? This Note looks at the three options in practice and reviews how they measure up against the four criteria. It concludes that governments should eliminate price subsidies if politically feasible. But even if they cannot, they can still reap the benefits of competition.
Publication(World Bank, Washington, DC, 2005-07) Boyle, Glenn ; Irwin, TimothyOutput-based payments are an important tool of government policy. Sometimes governments offer "output-based aid" to subsidize services sold to households. Because output-based payments are tied to the delivery of outputs, they have an obvious advantage over input-based payments. In agreeing to make such payments, however, governments assume a liability not unlike that created by taking on debt. Moreover, in some cases the payment amounts are subject to considerable uncertainty. As a result governments may benefit from estimating both the costs of these commitments, and the new fiscal risks they create-and comparing these costs and risks with those of alternative policies. Output-based payments come in many forms, as do the risks they present. However, measuring the risks and costs of output-based schemes is feasible but also, inevitably, mathematical. Quantifying risk necessarily involves some knowledge, and application of probability and statistics; estimating the cost of uncertain payments that occur at different points in time, requires asset pricing techniques from modern finance theory. Nevertheless, most of the important issues are conceptual, rather than technical.
Publication(World Bank, Washington, DC, 2003-12) Gray, Philip ; Irwin, TimothyEach year developing countries seek billions of dollars of investment in their infrastructure, and private investors, mostly in rich countries, seek places to invest trillions of dollars of new savings. Private foreign investment in the infrastructure of developing countries would seem to hold great promise. But foreign investors must cope with volatile developing country currencies. Many attempts to do so have created as many problems as they have solved. This note proposes that investors take on all financing-related exchange rate risk, even though this may mean higher tariffs for consumers as a premium for bearing that risk.
Publication(World Bank, Washington, DC, 2003-06) Gray, Philip ; Irwin, TimothyAmong the key risks facing foreign private entities investing in the infrastructure of developing countries is depreciation or devaluation of the local currency. Indeed, over the past 25 years developing country currencies lost 72 percent of their value relative to the U.S. dollar on average-and about a fifth lost more than 99 percent of their value. Sustainable private investment in infrastructure depends on addressing this risk well. Private infrastructure contracts in developing countries have usually passed much of this risk on to customers or the government. But because devaluations and large depreciations in developing countries often occur in the context of macroeconomic and financial upheaval, such risk allocations cannot always be made to work. The difficulty arises because the contracts raise prices precisely when the economy is suffering the most. If the government bears the risk because a state-owned utility is purchasing power from an independent power producer at prices denominated in U.S. dollars, for example, a contract will require steep increases in local currency prices just when the utility ' s revenues-and those of its owner, the government-are likely to be declining.
Publication(World Bank, Washington, DC, 2005-06) Boyle, Glenn ; Irwin, TimothyLong-term commitments to make output-based payments for infrastructure can encourage private investors to provide socially valuable services. Making good decisions about such commitments is difficult, however, unless the government understands the fiscal costs and risks of possible commitments. Considering voucher schemes, shadow tolls, availability payments, and access, connection, and consumption subsidies, this paper considers measures of the fiscal risks of such commitments, including the excess-payment probability and cash-flow-at-risk. Then it illustrates techniques, based on modern finance theory, for valuing payment commitments by taking account of the timing of payments and their risk characteristics. Although the paper is inevitably mathematical, it focuses on practical applications and shows how the techniques can be implemented in spreadsheets.
Publication(World Bank, 2008-03-01) Easterly, William ; Irwin, Timothy ; Servén, LuisWhen growth-promoting spending is cut so much that the present value of future government revenues falls by more than the immediate improvement in the cash deficit, fiscal adjustment becomes like walking up the down escalator. Although short-term cash flows matter, too tight a focus on them encourages governments to invest too little. Cash-flow targets also encourage governments to shift investment spending off budget by seeking private investment in public projects, irrespective of its real fiscal or economic benefits. To deal with this problem, some observers have suggested excluding certain investments (such as those undertaken by public enterprises deemed commercial or financed by multilaterals) from cash-flow targets. These stopgap remedies may help protect some investments, but they do not provide a satisfactory solution to the underlying problem. Governments can more effectively reduce the biases created by the focus on short-term cash flows by developing indicators of the long-term fiscal effects of their decisions, including accounting and economic measures of net worth, and, where appropriate, including such measures in fiscal targets or even fiscal rules.
Publication(World Bank, Washington, DC, 2019-08) Kikoni, Edith ; Madzarevic-Sujster, Sanja ; Irwin, Tim ; Jooste, CharlPolicy toward fiscal rules is an important issue in the countries of the Western Balkans (Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, and Serbia). According to a rough estimate, the countries with rules (all but North Macedonia) have complied with their debt and overall-deficit rules a little more than half the time. An online survey, conducted for this paper, suggests that public understanding of the rules is limited, which may reduce the political pressure for compliance. To get debt down to prudent levels, Albania and Montenegro will need a strong commitment to complying with their fiscal rules and will often have to do more than their deficit rules require. The following principles should guide future policy toward fiscal rules: more emphasis should be given to ensuring that fiscal rules are widely understood and enjoy the support of a broad range of stakeholders; policy toward the rules should be consistent with accession to the European Union, but the rules should be simpler than the European Union's and the debt limits lower; limits in rules should not be mistaken for targets; and public financial management should be improved to support the implementation of rules.