Preface
Executive Summary
1.	The Fiscal Outlook
2.	Taking Stock: A Progress Report on Fiscal Adjustment
3.	Moving Forward
Appendixes
1.	Distributional Consequences of Alternative Fiscal Consolidation Measures: Readings from the Data
2.	Fiscal Policies to Address Weak Employment
Methodological and Statistical Appendix
Acronyms
Country Abbreviations
Glossary
References

Boxes
1.	Commonly Used Definitions of the Fiscal Balance
2.	Lessons from Sweden
3.	Long-Run and Short-Run Determinants of Sovereign Bond Yields in Advanced Economies
4.	Financial Sector Support
5.	Do Pensioners Get Special Treatment on Taxes?
6.	The "Two-Pack": Further Reforms to Fiscal Governance in the Euro Area
7.	General Government Nonfinancial Assets: What Do We Know?
8.	Ireland: The Impact of Crisis and Fiscal Policies on Inequality
Figures
1.	Revisions to Overall Balance and Debt-to-GDP Forecasts since the Last Fiscal Monitor
2.	Number of Countries with 2013 Cyclically Adjusted Balance above/below the 2007 Level
3.	Advanced Economies: Fiscal Adjustment, Market Conditions, and Fiscal Positions
4.	Phasing of Fiscal Adjustment
5.	Cumulative Change in Gross Debt to GDP since the Start of Recessions
6.	Advanced Economies: Gross Debt to GDP, Level and Change
7.	Number of Countries with Increasing/Decreasing Gross Debt to GDP
8.	Interest Rate–Growth Differential, 2012
9.	Decomposition of Gross Debt Accumulation, 2011–13
10.	Selected Advanced Economies: Actual and Model-Based Sovereign Bond Yield Spreads
11.	Selected Advanced Economies: Real Sovereign Bond Yields
12.	Advanced Economies: Interest Expenditure
13.	Advanced Economies and Emerging Markets: Change in Revenue, Expenditure, and the Cyclically Adjusted Primary Balance, 2009–13
14.	Selected Advanced Economies: Present Discounted Value of Projected Pension Spending Reductions from Pension Reforms, 2010–50
15.	Selected G-20 and EU Economies: Change in Revenue and Expenditure Items, 2009–12
16.	Changes in Revenue and Expenditure, 2009–13
17.	Advanced Economies: Revenue and Expenditure Components Ranked According to Their Expected Long-Term Impact on Output
18.	Number of Countries with Budget Balance Rules Accounting for the Cycle
19.	Fiscal Indicators Index by Region, 2002–12
20.	Advanced Economies: Sovereign Bond Yields and Average Bond Maturity
21.	Low-Income Countries: Concessional Financing
22.	Selected Countries: Financial Sector Support Mea
23.	Eurosystem: Other Claims on Banks
24.	Advanced Economies: Model-Based Primary Balance and CAPB Needed to Reduce Debt
25.	Postrestructuring Losses and Domestic Investors
26.	Initial Fiscal Position and Output Recovery Rate
27.	Time to Recovery and Initial Conditions
28.	Selected European Countries: Change in Unemployment, Cyclically Adjusted Balance, and the Gini Coefficient, 2007–10
Tables
1.	Fiscal Balances, 2008–13
2.	Progress in Fiscal Consolidation through 2013
3.	General Government Debt, 2008–13
4.	Revenue and Expenditure Measures since 2009
5.	Fiscal Institutions
6.	Assessment of Fiscal Vulnerabilities over Time
7.	Assessment of Fiscal Vulnerabilities, October 2012
8.	Selected Advanced Economies: Gross Financing Needs, 2012–14
9.	Selected Emerging Markets: Gross Financing Needs, 2012–13
10.	Fiscal Policy Measures to Increase Employment
Statistical Tables
1.	Advanced Economies: General Government Overall Balance and Primary Balance
2.	Advanced Economies: General Government Cyclically Adjusted Balance and Cyclically Adjusted Primary Balance
3.	Advanced Economies: General Government Revenue and Expenditure
4.	Advanced Economies: General Government Gross Debt and Net Debt
5.	Emerging Markets: General Government Overall Balance and Primary Balance
6.	Emerging Markets: General Government Cyclically Adjusted Balance and Cyclically Adjusted Primary Balance
7.	Emerging Markets: General Government Revenue and Expenditure
8.	Emerging Markets: General Government Gross Debt and Net Debt
9.	Low-Income Countries: General Government Overall Balance and Primary Balance
10.	Low-Income Countries: General Government Revenue and Expenditure
11.	Low-Income Countries: General Government Gross Debt and Net Debt
12a.	Advanced Economies: Structural Fiscal Indicators
12b.	Emerging Markets: Structural Fiscal Indicators
13a.	Advanced Economies: Illustrative Adjustment Needs
13b.	Emerging Markets: Illustrative Adjustment Needs
14.	General Government Nonfinancial Assets
15a.	Advanced Economies: Taxation of Public Pension Benefits
15b.	Emerging Markets: Taxation of Public Pension Benefits

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With growth weakening in many parts of the world and downside risks on the rise, fiscal consolidation remains challenging. However, considerable progress has been made over the last two years in strengthening the fiscal accounts following their sharp deterioration in 2008–09, and more is planned. This issue of the Fiscal Monitor takes stock of this progress, focusing on its size, composition, and implications for employment and social equity. Several conclusions emerge:

• Most countries have made significant headway in rolling back fiscal deficits. In about half of the countries covered in this Monitor, deficits are expected to be at or lower than their precrisis levels next year. The improvement in fiscal balances is most pronounced in advanced economies, where the fiscal shock was larger, followed by emerging market economies and to a lesser extent by low-income countries.
• Efforts at controlling debt stocks are taking longer to yield results. Debt ratios peaked early in emerging market economies but are not expected to stabilize before 2014–15 in many advanced economies. The slower progress in advanced economies is due to the magnitude of the shock and the sluggishness of the recovery thereafter, but in some cases also to high interest rates, which are negatively affected by policy uncertainties and banking fragilities. In many advanced economies, consolidation efforts will need to persist for many years if debt ratios are to be restored to precrisis levels.
• Countries with sizable fiscal consolidation needs have typically relied on a mix of revenue and expenditure policies. However, advanced economies have in general relied more than emerging markets and low-income countries on spending retrenchment. Most countries have tried to focus on measures that would have the smallest negative impact on growth, such as entitlement reforms and increases in less distortionary taxes, for instance, property levies. Overall, the composition of fiscal adjustment as envisaged should result in public finances that are more growth friendly and efficient after the consolidation phase, though some countries—especially those with large fiscal adjustment plans—have needed to include measures like investment cuts and broader tax increases that may weigh on longterm growth.
• Both spending and revenue measures have important implications for employment and social equity, which need to be taken into account if the large consolidation efforts underway are to be sustainable. An appropriate degree of progressivity in taxation and access to social benefits is imperative for limiting the negative social effects of adjustment packages. Better-designed tax and social benefit policies, accompanied by active labor market programs, can help boost labor supply and demand. However, structural reforms remain the key to better growth and employment prospects.

Despite substantial progress in restoring the sustainability of public finances, fiscal vulnerabilities remain elevated. Public debt rollover requirements are still very high and expose countries to the vagaries of financial markets. Partly because of the ample liquidity provided by central banks in support of economic activity, markets have in most cases taken large increases in public debt in stride, with solvency concerns remaining elevated only for a subset of euro area countries. But these benign market responses are premised on continued fiscal adjustment and a favorable growth environment.

With downside risks to the global economy mounting, policymakers must once again tread the narrow path that will permit them to continue strengthening the public finances while avoiding an excessive withdrawal of fiscal support for a still-fragile economic recovery. Whereas most emerging markets and low-income countries can afford to pause their adjustment efforts to await a Executive Summary Fiscal Monitor: Taking Stock—A Progress report on fiscal adjustment x International Monetary Fund | October 2012 more hospitable growth outlook, many advanced economies do not have that luxury. To the extent that financing conditions allow, adjustment should proceed at a pace that is consistent with the state of the economy. To take cyclical considerations better into account, policymakers should focus on structural or cyclically adjusted targets. Should growth disappoint, the first line of defense should be monetary policy and the free play of automatic fiscal stabilizers. If growth should fall significantly below current World Economic Outlook projections, countries with room for maneuver should slow their pace of planned adjustment over 2013 and beyond. But short-term caution should not be an excuse to slow or delay efforts to put public finances on a sounder footing over the medium term, as this remains a key requirement for growth. And even countries with relatively comfortable fiscal positions should maintain appropriate buffers to be able to confront future shocks.