Fiscal Policy for Growth
While the term 'fiscal space' is new, the issue is quite old. Fiscal space refers to availability of budgetary resources for a specific purpose, typically growth-enhancing investment uses, without jeopardizing the sustainability of the go...
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| Format: | Brief |
| Language: | English |
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World Bank, Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2009/04/10536719/fiscal-policy-growth http://hdl.handle.net/10986/11120 |
| Summary: | While the term 'fiscal space'
is new, the issue is quite old. Fiscal space refers to
availability of budgetary resources for a specific purpose,
typically growth-enhancing investment uses, without
jeopardizing the sustainability of the government's
financial position, or the stability of the economy. The
recent interest in fiscal space originated as a reaction to
International Monetary Fund (IMF), supported
fiscal-adjustment programs that by focusing too narrowly on
fiscal-deficit targets often ignored the quality of the
underlying adjustment. Affected countries meanwhile
advocated for fiscal space for investments in physical and
human infrastructure crucial for economic growth. The IMF
independent evaluation office, in their study on fiscal
Adjustment in IMF supported programs acknowledged this
problem, observing that 'much of the fiscal adjustment
achieved is through measures that do not assure long-term
sustainability and flexibility of fiscal systems to future
shocks'. In effect, the improvement of the fiscal
balance in the context of IMF-supported programs too often
relied heavily in cuts in public investment that improve
today's government cash flow at the expense of future
economic growth. |
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