Public finance in adjustment programs
This paper reviews the experience with public finance issues under adjustment programs. This experience shows that fiscal changes are often triggered by budget and balance of payment crises. As a result, short-term considerations have dominated the policy measures introduced. Traditional stabilization policies usually emphasize measures aimed at reducing aggregate demand. On the fiscal side, this has implied cutbacks in public expenditures. There is, however, growing recognition of the need for more growth oriented adjustment programs, which entail a more comprehensive and durable approach to fiscal reform and therefore require a medium-term perspective. Countries committed to fundamental reform of fiscal and other key policy areas should be able to avail themselves of external financial support that lasts long enough for them to initiate and sustain the change process. They must strike a balance between stabilization and adjustment.
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- Anand, Ritu & Chhibber, Ajay & van Wijnbergen, Sweder, 1988. "External balance, fiscal policy, and growth in Turkey," Policy Research Working Paper Series 86, The World Bank.
- Balassa, Bela, 1988. "Public finance and economic development," Policy Research Working Paper Series 31, The World Bank.
- Fischer, Stanley, 1986. "Issues in Medium-term Macroeconomic Adjustment," World Bank Research Observer, World Bank Group, vol. 1(2), pages 163-182, July.
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