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Making Fiscal Space Happen: Managing Fiscal Policy in a World of Scaled-Up Aid

Author

Listed:
  • Mr. Xavier Debrun
  • Mr. Peter S. Heller
  • Mr. Theo Thomas
  • Mr. Menachem Katz
  • Ms. Isabell Adenauer
  • Miss Taline Koranchelian

Abstract

Debt relief and the scaling up of aid to low-income countries should allow for greater fiscal space for expenditure programs to create long-term growth and lower poverty rates. But designing a suitable medium-term fiscal framework that fosters a sustainable delivery of better public services and infrastructure while maintaining a credible commitment to fiscal prudence confronts many challenges. This paper discusses what low-income countries can do to shape fiscal policy frameworks that are ambitious in trying to absorb additional aid while still ensuring longer-term sustainability for government expenditure programs and finances. It suggests what approaches can be used to manage the greater fiscal policy risks associated with a scaled-up aid environment, including coordination with monetary policy. The paper also discusses what institutional changes are needed if donors and countries are to facilitate the implementation of a higher level of aid-financed spending programs.

Suggested Citation

  • Mr. Xavier Debrun & Mr. Peter S. Heller & Mr. Theo Thomas & Mr. Menachem Katz & Ms. Isabell Adenauer & Miss Taline Koranchelian, 2006. "Making Fiscal Space Happen: Managing Fiscal Policy in a World of Scaled-Up Aid," IMF Working Papers 2006/270, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2006/270
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    References listed on IDEAS

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    Cited by:

    1. Djedje Hermann YOHOU, 2015. "In Search of Fiscal Space in Africa: The Role of the Quality of Government Spending," Working Papers 201527, CERDI.
    2. David Fielding & George Mavrotas, 2008. "Aid Volatility and Donor–Recipient Characteristics in ‘Difficult Partnership Countries’," Economica, London School of Economics and Political Science, vol. 75(299), pages 481-494, August.
    3. Cecilia Briceño-Garmendia & Karlis Smits & Viven Foster, 2009. "Financing Public Infrastructure in Sub-Saharan Africa," World Bank Publications - Reports 28238, The World Bank Group.
    4. Nataliya Synyutka & Anatolii Lutsyk, 2018. "Transformation of Fiscal Policy and Fiscal Space under Conditions of Digital Technologies Expansion," Oblik i finansi, Institute of Accounting and Finance, issue 4, pages 108-113, December.
    5. Devarajan, Shantayanan & Go, Delfin S. & Page, John & Robinson, Sherman & Thierfelder, Karen, 2008. "Aid, growth, and real exchange rate dynamics," Policy Research Working Paper Series 4480, The World Bank.
    6. Sanjeev Gupta, 2008. "Enhancing Effective Utilization of Aid in Fragile States," WIDER Working Paper Series RP2008-07, World Institute for Development Economic Research (UNU-WIDER).
    7. Strand, Jon, 2009. ""Revenue management"effects related to financial flows generated by climate policy," Policy Research Working Paper Series 5053, The World Bank.
    8. Ms. Anja Baum & Andrew Hodge & Ms. Aiko Mineshima & Ms. Marialuz Moreno Badia & Rene Tapsoba, 2017. "Can They Do It All? Fiscal Space in Low-Income Countries," IMF Working Papers 2017/110, International Monetary Fund.
    9. Mr. Jan Kees Martijn & Markus Berndt & Abu Shonchoy & Mr. Paolo Dudine, 2008. "The Spending and Absorption of Aid in PRGF Supported Programs," IMF Working Papers 2008/237, International Monetary Fund.

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