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

By Anja Baum, Andrew Hodge, Aiko Mineshima, Marialuz Moreno Badia, Rene Tapsoba

May 5, 2017

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Format: Chicago

Anja Baum, Andrew Hodge, Aiko Mineshima, Marialuz Moreno Badia, and Rene Tapsoba. Can They Do It All? Fiscal Space in Low-Income Countries, (USA: International Monetary Fund, 2017) accessed September 19, 2024

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.

Subject: Expenditure, Fiscal policy, Fiscal space, Fiscal stance, Public debt, Public investment spending

Keywords: Debt dynamics, Debt limit, Debt ratio, Exchange rate, Financing condition, Financing constraint, Financing mix, Fiscal space, Fiscal stance, Global, Interest rate, LIC financing landscape, Low-income countries, Public debt, Public investment spending, SDGs, Sustainability, WP

Publication Details

Pages:

40
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2017/110
Stock No:

WPIEA2017110
ISBN:

9781475599046
ISSN:

1018-5941

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