Increasing the fiscal space of developing countries to achieve the SDGs

Purpose – This paper aims to understand the relationship in developing countries between fiscal consolidation and public investment – a flexible part of the budget that is easier to cut during consolidation effort, but with potentially negative growth effects. Analyzing in detail the case of Peru, the paper explores alternative fiscal rules and frameworks that might help create fiscal space for infrastructure investment. Design/methodology/approach – The paper analyses trends in public and total infrastructure investment in six large Latin American economies, in the light of fiscal developments since the early 1980s. In particular, the paper explores the association between fiscal consolidations (improvements in the structural fiscal balance) and public infrastructure investment rates. In the second part, the paper analyzes recent changes in the fiscal framework of Peru and shows how they were conductive in creating additional fiscal space. Findings – The authors argue that post-crisis fiscal frameworks, notably fiscal rules that are increasingly popular in the region, should not only consolidate the recent progress towards debt sustainability, but also create the fiscal space to close these infrastructure gaps. These points are illustrated in a detailed account of recent developments in the fiscal framework and public investment in the Peruvian case. Originality/value – The paper contributes new evidence to the literature on fiscal consolidation and the composition of government expenditures. While the literature based on evidence from the 1990s has argued that fiscal consolidation plans in Latin America have almost always led to a significant reduction in public infrastructure investment, the paper finds less clear cut evidence when extending the analysis backwards (1980s) and forwards (2000s). The example of the case of Peru is used to explore fiscal institutions and rules that might be useful for other developing countries that face important infrastructure gaps.

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A Probabilistic Approach to Fiscal Space and Prudent Debt Level: Application to Low-Income Developing Countries

SSRN Electronic Journal ◽

10.2139/ssrn.2882600 ◽

2016 ◽

Author(s):

Olumuyiwa Adedeji ◽

Calixte Ahokpossi ◽

Claudio Battiati ◽

Mai Farid

Keyword(s):

Developing Countries ◽

Low Income ◽

Probabilistic Approach ◽

Debt Level ◽

Fiscal Space

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Increasing the fiscal space of developing countries to achieve the SDGs

Sustainable Development Report 2021 ◽

10.1017/9781009106559.002 ◽

2021 ◽

pp. x-x

Keyword(s):

Developing Countries ◽

Fiscal Space

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The Austerity Decade 2010-20

Social Policy and Society ◽

10.1017/s1474746420000433 ◽

2020 ◽

Vol 20 (1) ◽

pp. 142-157

Author(s):

Isabel Ortiz ◽

Matthew Cummins

Keyword(s):

Sustainable Development ◽

Developing Countries ◽

International Monetary Fund ◽

Government Spending ◽

Global Economy ◽

High Income ◽

Budget Cuts ◽

Fiscal Adjustment ◽

Fiscal Space ◽

Negative Impacts

In the wake of the financial, food and fuel crises, a fourth ‘F’ shockwave hit the global economy in 2010: fiscal adjustment. It would mark the onset of a prolonged period of budget cuts that is now projected to continue at least through 2020 in high-income and developing countries alike. This article: (i) examines International Monetary Fund (IMF) government spending projections for 187 countries from 2005 to 2020, indicating a decade of austerity from 2010 onwards; (ii) reviews 616 IMF country reports in 183 countries to identify the main adjustment measures; and (iii) discusses the negative impacts of austerity on jobs and welfare, pointing to alternative policies to identify fiscal space for equitable and sustainable development. Note that this analysis was done prior to COVID-19, and the estimates for 2019 and 2020 reflect pre-pandemic projections.

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The Vulnerability of Developing Countries to the Economic Crisis Due to the Pandemic: What Can Indonesia Do?

KnE Social Sciences ◽

10.18502/kss.v5i8.9352 ◽

2021 ◽

Author(s):

Farida Rahmawati ◽

Fidelis Dwi Putra Santoso

Keyword(s):

Developing Countries ◽

Informal Sector ◽

Economic Performance ◽

Global Economy ◽

Budget Deficit ◽

Developed Countries ◽

Government Policies ◽

Government Performance ◽

Demographic Differences ◽

Fiscal Space

The spread of COVID-19 has had a significant impact on the global economy, including in Indonesia. The pandemic affected all economic performance, including growth, price stability, exchange rates, unemployment, poverty and so on. Although the crisis was felt by all countries, developing countries felt a greater impact than developed countries. Through a qualitative analysis, this paper aims to explain why this can happen, what are government policies for pandemic mitigation and what are their impact. The results show that the crisis caused by the pandemic in Indonesia was caused by four things, namely the dominance of the informal sector, limited fiscal space, poor governance and demographic differences between developed and developing countries. So, a strategy is needed to overcome these obstacles. Strategies that can be carried out are through evaluating government performance, increasing the budget deficit and moderating lockdowns. These three strategies are expected to be able to help Indonesia through the crisis caused by the COVID-19 pandemic. Keywords: COVID-19 Pandemic, Demographic Differences, Informal Sector, Limited Fiscal Space, Poor Governance

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Export Product Concentration and De Facto Fiscal Space: Does Openness to International Trade matter?

Global Economy Journal ◽

10.1515/gej-2017-0092 ◽

2018 ◽

Vol 18 (1) ◽

pp. 20170092

Author(s):

Sena Kimm Gnangnon

Keyword(s):

Developing Countries ◽

International Trade ◽

Positive Impact ◽

Product Concentration ◽

Empirical Results ◽

Fiscal Space ◽

High Level ◽

The Impact ◽

The Relationship ◽

Export Product

This paper investigates the relationship between trade and fiscal space by examining whether export product concentration matters for fiscal space, in particular the “De Facto Fiscal Space”. The analysis relies on a panel dataset comprising 145 countries, including both developed and developing countries over the period 1984–2010. The empirical results suggest that on average, countries with a high level of export product concentration tend to experience a greater fiscal space. In particular, the impact of export concentration on fiscal space depends on countries’ level of development, and is higher, the lower the countries’ level of development. In addition, the positive impact of export concentration on fiscal space is higher, the higher the countries’ degree of openness to international trade.

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