Belgium: Selected Issues

BELGIUM SELECTED ISSUES This paperonBelgiumwas prepared by a staff team of the International Monetary Fundas background documentation for the periodic consultation with the member country. Itis based on the information available at the time it was completed onMarch3, 2025. Copies ofthis report are available to the public from International Monetary Fund•Publication ServicesPO Box 92780•Washington, D.C. 20090Telephone: (202) 623-7430•Fax: (202) 623-7201E-mail:publications@imf.org Web:http://www.imf.org International Monetary FundWashington, D.C. BELGIUM SELECTED ISSUES ApprovedByEuropean DepartmentPreparedbyYu Ching Wong, Xun Li,Jean-Jacques Hallaert,KarenCoulibaly(all EUR)andEdHearne(FAD) INCREASING PUBLIC INVESTMENT, FOSTERING DIGITALIZATION, ANDSUPPORTING THE GREEN TRANSITION: A DIFFICULT CHALLENGE UNDER FISCALCONSOLIDATION __________________________________________________________________________4 A.Introduction ______________________________________________________________________________4B.Current State of Public Investment______________________________________________________6C.Addressing Investment Needs for Digitalization and the Green Transition ____________ 10D.Policy Recommendations ______________________________________________________________ 15E.Conclusion_____________________________________________________________________________ 16 BOXES 1.Public Investment: A Catalyst for Demand and Growth Potential ________________________52.Consideration on Measurement of Public Investment____________________________________73.Climate Physical Risks and Economic Impact ___________________________________________ 124.Investment in Electricity Grids __________________________________________________________ 14 FIGURES 1.Gross Fixed Capital Formation and Capital Stock_________________________________________62.Public Gross Fixed Capital Formation_____________________________________________________73.Public GFCF by Function (COFOG)________________________________________________________84.Public GFCF by Government____________________________________________________________95.Infrastructure Efficiency________________________________________________________________96.Current State of Digital Infrastructure __________________________________________________ 107.Fossil Fuel Subsidies and Electricity Prices______________________________________________ 138.Electric Vehicles and Electricity Prices_________________________________________________ 14 References ________________________________________________________________________________ 17 IMPROVING THE EFFICIENCY OF PUBLIC INVESTMENT IN INFRASTRUCTURE IN BELGIUM___ 19 A. Introduction and Overview _________________________________________________________________________19B. Strategic Planning of Public Investment ____________________________________________________________21C. Project Preparation and Governance _______________________________________________________________23D. Project Selection and Governance _________________________________________________________________26E. Coordination and Institutional Arrangements for Public Investment _______________________________30F. Recommendations__________________________________________________________________________________33 BOXES 1. Cost Overrun in Public Projects_____________________________________________________________________252. Major Project Governance Processes—Selected European Examples ______________________________273. Infrabel’s Regional Investment Key _________________________________________________________________314. Gatekeeping Functions of Finance Ministries in Public Investmentin Advanced Economies _______33 FIGURES 1. Comparative Infrastructure Efficiency and Competitiveness ________________________________________202. Flanders Complex Project Process __________________________________________________________________283. Aquafin’s Project Governance Process______________________________________________________________29 References ____________________________________________________________________________________________35 PUBLIC EDUCATION IN BELGIUM: IMPROVING OUTCOME WHILE REDUCING COST __________ 37 A. Belgium Spends More on Education Than Peers ___________________________________________________38B. Education Outcomes are Comparable to Peers and Deteriorating _________________________________40C. Potential Efficiency Gains are Large ________________________________________________________________44D. Efficiency-Increasing Reforms ______________________________________________________________________46E. Conclusion__________________________________________________________________________________________63 FIGURES 1. Evolution of Public Expenditure on Education ______________________________________________________382. Spending Per Full-Time Equivalent Student ________________________________________________________393. Average Reading Achievement of Fourth G