Guidelines for Fiscal Adjustment
Fiscal Affairs Department
International Monetary Fund
Contents
Preface
Introduction
Why May Fiscal Adjustment Be Needed?
The Impact of Fiscal Policy on Macroeconomic Policy Objectives
Inflation
External Current Account
Growth
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
References
Boxes
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.
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