The paper advocates leveraging anti-money laundering (AML) measures to enhance tax compliance, tackle tax crimes, and, in turn, help mobilize domestic revenues. While AML measures have already been deployed to improve tax compliance, including during the European debt crisis, the benefits that such measures could bring to the integrity of the tax system are yet to be fully realized. In recent years, the relevance of AML measures for tax purposes resurfaced in public discourse in light of numerous data leaks that provided ample evidence of the closely intertwined nature of tax crimes and money laundering. There might now be the right political momentum for greater utilization of AML measures given post-pandemic calls for a more progressive tax system, elevated sovereign debt burdens, a challenging global economic outlook, and widespread cost-of-living crisis. In this context, the IMF has stressed the importance of rebuilding fiscal buffers, as countries with more fiscal room are better placed to weather the economic slowdown and protect households and businesses.

The background papers support the stocktaking analysis and the proposed way forward for the 2023 review of the IMF's AML/CFT Strategy. The five background papers provide in-depth discussions on the following key topics: (i) illicit financial flows; (ii) the impact of money laundering in financial stability; (iii) synergies between financial integrity issues and other Fund policies and work; (iv) the Fund’s collaboration with key partners in the AML/CFT global policy architecture; and (v) stakeholders’ views of the effectiveness of the Fund’s AML/CFT engagement.

Domestic revenue mobilization has been a longstanding challenge for countries in the Middle East and Central Asia. Insufficient revenue has often constrained priority social and infrastructure spending, reducing countries’ ability to reach the Sustainable Development Goals, improve growth prospects, and address climate related challenges. Moreover, revenue shortfalls have often been compensated by large and sustained debt accumulation, raising vulnerabilities in some countries, and limiting fiscal space to address future shocks. The COVID-19 pandemic and the war in Ukraine have compounded challenges to sustainable public finances, underscoring the need for revenue mobilization efforts. The recent global crises have also exacerbated existing societal inequalities and highlighted the importance of raising revenues in an efficient and equitable manner. This paper examines the scope for additional tax revenue mobilization and discusses policies to gradually raise tax revenue while supporting resilient growth and inclusion in the Middle East and Central Asia. The paper’s main findings are that excluding hydrocarbon revenues, the region’s average tax intake lags those of other regions; the region’s fragile and conflict-affected states (FCS) face particular challenges in mobilizing tax revenue; In general, there is considerable scope to raise additional tax revenue; countries have made efforts to raise tax collection, but challenges remain; tax policy design, notably low tax rates and pervasive tax exemptions, is an important factor driving tax revenue shortfalls; weak tax compliance, reflecting both structural features and challenges in revenue administration, also plays a role; and personal income tax systems in the region vary in their progressivity—the extent to which the average tax rate increases with income—and in their ability to redistribute income. These findings provide insights for policy action to raise revenue while supporting resilient growth and inclusion. The paper’s analysis points to these priorities for the region to improve both efficiency and equity of tax systems: improving tax policy design to broaden the tax base and increase progressivity and redistributive capacity; strengthening revenue administration to improve compliance; and implementing structural reforms to incentivize tax compliance, formalization, and economic diversification.

Supported by a large policy package, Rwanda’s economy rebounded in 2021 after contracting in the preceding year due to the COVID-19 shock. However, the country now faces multi-faceted challenges—pandemic scars, headwinds from the war in Ukraine, and climate-related shocks, meanwhile inflationary pressures have increased markedly. Downside risks are significant from the war spillovers, through further pressures on energy, food, and fertilizer prices, global financial tightening, and slowdown in major trading partners, in addition to climate-related shocks. Against this backdrop, the authorities have requested a new Policy Coordination Instrument (PCI) and an arrangement under the Resilience and Sustainability Facility (RSF) to support their efforts in maintaining macroeconomic stability, advancing their reform agenda, including on climate to enhance Rwanda’s resilience to climate-related shocks, and insuring against downside risks. They will cancel the current PCI (expiring in June 2023) upon approval of the new PCI.

In a sweeping survey of African economies, leading scholars offer the latest research into the biggest current influences on African growth and development, taking account of relevant institutional contexts as well as significant or unique problems that have slowed Africa’s progress.

Sudan, with the support of the international community, is seeking to implement an ambitious reform program to address major macroeconomic imbalances and support sustainable, inclusive growth. A new transitional government was established in the wake of the 2019 revolution with the mandate to carry out sweeping reforms to reverse decades of economic and social decline. The government is pursuing a transformational reform agenda focused on: (i) achieving internal peace based on inclusion, regional equity, and justice; (ii) stabilizing the economy and correcting the large macroeconomic imbalances; and (iii) providing a foundation for future rapid growth, development, and poverty reduction. The government has achieved important milestones, most prominently a peace agreement with almost all internal armed opposition groups in October 2020 to end 17 years of conflict. It has also agreed to ambitious reforms and policy adjustments in the context of an International Monetary Fund (IMF) Staff Monitored Program (SMP) that meets the Upper Credit Tranche (UCT) conditionality standard and an International Development Association (IDA) Development Policy Financing (DPF) operation. Furthermore, on December 14, 2020, Sudan was officially removed from the United States State Sponsors of Terrorism List (SSTL), ending almost three decades of international isolation. While positive changes are underway, political contestation over power sharing arrangements remains acute. It is critical for Sudan to take advantage of a still favourable political economy to tackle its macroeconomic imbalances and put itself on a sustainable development trajectory.