Embracing Change: A Q&A with Director Vitor Gaspar
December 16, 2024
For 60 years, the Fiscal Affairs Department (FAD) has been the Fund’s main driver of fiscal policy advice to IMF’s member countries. In the following interview, FAD Director Vitor Gaspar, reflects on how department has evolved since it last celebrated a significant milestone 10 years ago.
Reflecting on the evolution of FAD since the 50th anniversary celebration in 2014, what have been the most significant achievements?
There have been many significant achievements for FAD in the last ten years. I will mention just two of them.
One was the creation of our Climate Policy Division and of the “Govtech” group in the 2020s. The underlying themes here are the energy transition and technological change. As we know, in order to make climate change compatible with inclusive and sustained growth, a profound transformation must take place. Green technologies must substitute for brown technologies. In recent decades there has been tremendous reduction in the cost of producing green energy. Future growth will be powered by clean energy, and the role of technology is likely to become even more important.
Technology will also shape public administration. Digitalization provides governments with ample opportunities to enhance the efficiency and effectiveness of spending and to transform tax policy and revenue administration. It also makes it easier to make government finances transparent and accountable. To support member governments with their digital transformation plans through capacity development and policy advice was the impetus for creating the GovTech group.
Another major achievement was the creation of the Annual Richard Goode Lecture in 2015. Richard Goode was the first Director of FAD and a renowned expert on taxation and finance for development. Richard Goode lecturers have included two Nobel Prize winners—Thomas Sargent (2015) and Angus Deaton (2019). Some of the younger lecturers also went on to win the Nobel Prize, including Esther Duflo, who lectured in 2016 and won the prize in 2019, and Daron Acemoglu, who lectured in 2020 and won the prize in 2024.The Richard Goode Lecture provides an excellent opportunity for FAD to foster collaboration with academia. The lectures bring together researchers, policymakers, market participants, and Fund staff. For example, the first Richard Goode Lecture by Thomas Sargent was about debt limits, which motivated an important book project, “Debt and Entanglements Between the Wars,” and led to the creation of the sovereign debt network.
What was the department’s priority in 2014?
Back in 2014, there was a perception that FAD was too decentralized and too fragmented. Therefore, exploring synergies inside FAD was a priority, and in fact had started to be looked at when I joined FAD a little over ten years ago.
Two important areas form the double helix of FAD’s genetic code. The first is policy-oriented applied research in public finance that aims to close the gap between theory and practice. The second is capacity development. Capacity development determined the timing of the creation of FAD. Former Director Vito Tanzi, who was the longest serving head of FAD, reminded us of that story during the FAD@60 event. Members from the newly independent states in Africa and Asia were demanding technical assistance and policy support. These were urgent priorities as fiscal institutions constitute the financial backbone of a sovereign state. Tax capacity is the general enabler for state capacity.
FAD was organized thematically with divisions covering tax policy, revenue administration, expenditure policy, and public finance management. The structure provided a huge nest of experts in all areas of public finance. There were great benefits to having them work together holistically and exploit synergies. We have made a lot of progress in that direction compared with ten years ago.
What are some of the biggest challenges the department has faced over the last 10 years, and how did you overcome them?
The pandemic comes to mind.
Shortly after COVID-19 was declared a pandemic, staff had to suddenly shift to working remotely. It happened rapidly and with little warning. All daily interactions among staff became virtual by using digital technologies, which was not a standard beforehand. It was very challenging for everyone. But people responded remarkably well and adapted very quickly. Work that was urgently needed was still produced in high quality.
COVID-19 is associated with the Great Lockdown. It was a once-in-a-century health crisis. Initially people did not know what to expect and financial assets were sold across the board. Rapid policy actions were called for to stabilize the situation and save lives and livelihoods. On fiscal policy, the Fund recommended governments to “spend whatever you need to contain the pandemic but make sure you keep the receipts.” The policy response was astonishingly quick and decisive. But fiscal deficits increased to a record level and public debts elevated to unprecedented heights. Although public debts declined significantly afterwards, global public debt is still high and turned up again in 2023. According to the Fall 2024 Fiscal Monitor, public debt is very high, rising, and risky. In most countries, additional efforts are needed to bring down public debt ratios, with high confidence.
What is your vision for the department’s future, and how do you see its role expanding or transforming in the next decade?
The department hosted its 60th anniversary this past November to look back at the 60 years of FAD’s history. All the discussions highlighted FAD as a center of excellence in applied research and a powerhouse in capacity development. This was only possible through the enduring efforts by FAD’s outstanding staff, and the great cooperation and collaboration with internal and external stakeholders. FAD has a very strong corporate service culture. These traditions provide the best foundation for an even better FAD in the coming decade.
Looking ahead, FAD has to continue to improve and re-invent itself. Change is important to keep up with the world. FAD needs to continue adapting to new challenges and transforming itself ahead of the curve. At FAD@60, Adam Posen, President of the Petersen Institute of International Economics, praised FAD for “[having] done a really good job of changing its views on an evidence-based way and not losing credibility.” He also said that he is hopeful that FAD will continue to innovate and be evidence-based. I agree with him. I am confident that FAD will get better in coming years. I am also confident that it will continue to base its policy advice on the best available analysis and data.
To echo what former FAD Director Teresa Ter-Minassian said at the 60th anniversary celebration, I am looking forward to many years of continued success for FAD.