Pamphlet Series
No. 49

International Monetary Fund
Washington, D.C.

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ISSN 0538-8759
ISBN 1-55775-535-3

Guidelines for Fiscal Adjustment
Fiscal Affairs Department
International Monetary Fund




Why May Fiscal Adjustment Be Needed?
    The Impact of Fiscal Policy on Macroeconomic Policy Objectives
         External Current Account
    Fiscal Adjustment to Ensure Sustainability
    Links to Other Policy Instruments

How Should the Fiscal Stance Be Assessed?
    Fiscal Impact of Alternative Methods of Deficit Financing
    Other Measures Used to Assess the Fiscal Stance
    The Sensitivity of a Fiscal Assessment to the Time Frame of Analysis
    Definition of Government Accounts for Macroeconomic Analysis
         Coverage of Government Operations
         Timing of the Impact of Fiscal Transactions
         Defining the "Overall Fiscal Balance"

How Much Fiscal Adjustment Is Required?
    A Framework for Fiscal Adjustment
    Determining the Amount of Fiscal Adjustment
         Reducing the Fiscal Deficit
         Quality of Adjustment

How Should Fiscal Adjustment Be Effected?
    Measures to Improve the Tax System and Increase Revenue
         Characteristics of a Desirable Tax System
         Design of Major Taxes
    Rationalization of Expenditure Policies
         Expenditure Reduction in the Short Run
         Structural Public Expenditure Reform



This pamphlet, prepared by the staff of the Fiscal Affairs Department of the IMF, has not been discussed by the IMF's Executive Board. The opinions expressed in the pamphlet are those of the staff and do not necessarily represent the views of the IMF's Executive Board.

The term "country," as used in this paper, does not in all cases refer to a territorial entity that is a state as understood by international law and practice; the term also covers some territorial entities that are not states, but for which statistical data are maintained and provided internationally on a separate and independent basis.