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Making Fiscal Space Happen!

Author

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

Abstract

Debt relief and the scaling up of aid to low-income countries should allow for increased fiscal space for expenditure programs to spur long-term growth and reduce poverty. But as discussed in Peter Heller's article Pity the Finance Minister (World Economics, Vol. 6, No. 4), 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 raises many challenges. This article first discusses what low-income countries can do to formulate fiscal policy frameworks that are ambitious in their goals for absorbing additional aid while maintaining longer-term sustainability of the expenditure programs and government finances. It then suggests the approaches required to manage the heightened fiscal policy risks associated with a scaled-up aid environment, including issues of coordination with monetary policy. And finally, the article 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

  • Peter S. Heller & Menachem Katz & Xavier Debrun & Theo Thomas & Taline Koranchelian & Isabell Adenauer, 2006. "Making Fiscal Space Happen!," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 7(3), pages 89-132, July.
    • Handle: RePEc:wej:wldecn:250
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    Citations

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    Cited by:

    1. 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.
    2. Strand, Jon, 2009. ""Revenue management"effects related to financial flows generated by climate policy," Policy Research Working Paper Series 5053, The World Bank.
    3. Djedje Hermann Yohou, 2015. "In Search of Fiscal Space in Africa: The Role of the Quality of Government Spending," CERDI Working papers halshs-01222812, HAL.
    4. Maminiriniaina Jean Rolland ANDRIANJAKA & Blanche Nirina RICHARD, 2025. "Financement durable de la protection sociale non contributive à Madagascar par l’extension de la couverture du programme de transfert monétaire « Argent Contre Travail Productif »," Les Cahiers du CEDIMES, Institut CEDIMES, vol. 20(3), pages 215-226.
    5. World Bank, 2008. "Haiti : Public Expenditure Management and Financial Accountability Review," World Bank Publications - Books, The World Bank Group, number 6469, April.
    6. 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.
    7. 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).
    8. 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.
    9. Sessinou Erick Abel Dedehouanou & Abou Kane, 2023. "Macroeconomic challenges of scaling up aid to West African Economic and Monetary Union," South African Journal of Economics, Economic Society of South Africa, vol. 91(3), pages 330-350, September.

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