Can They Do It All? Fiscal Space in Low-Income Countries

Author/Editor:

Anja Baum ; Andrew Hodge ; Aiko Mineshima ; Marialuz Moreno Badia ; Rene Tapsoba

Publication Date:

May 5, 2017

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

According to U.N. estimates, low-income countries will have to increase their annual public spending by up to 30 percent of GDP to achieve the Sustainable Development Goals (SDGs), raising the question of whether they can do it all. This paper develops a new metric of fiscal space in low-income countries that accounts for macroeconomic uncertainty, allowing us to assess whether those spending needs can be accommodated. Illustrative simulations based on this methodology imply that, even under benign conditions, the fiscal space available in lowincome countries is likely insufficient to undertake the spending needed to achieve the SDGs. Improving public investment efficiency and domestic revenue mobilization can somewhat narrow the gap but it will require major efforts relative to recent trends.

Series:

Working Paper No. 17/110

Subject:

English

Publication Date:

May 5, 2017

ISBN/ISSN:

9781475599046/1018-5941

Stock No:

WPIEA2017110

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

40

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