Fiscal Adjustment for Stability and Growth prepared by the Fiscal Affairs Department approved by Teresa Ter-Minassian (1/2006).
“This paper aims to inform policymakers, and other interested parties, about the IMF’s approach to fiscal adjustment. The approach focuses on the role of sound and sustainable government finances in promoting macroeconomic stability and growth. Achieving, and maintaining, such a fiscal position often requires adjusting fiscal policy, as well as strengthening fiscal institutions. Fiscal adjustment may involve either tightening or loosening the fiscal stance, depending on individual country circumstances.
This paper updates and replaces the original 1995 pamphlet, “Guidelines for Fiscal Adjustment.” There have been significant changes in the world economy and in the way the IMF approaches fiscal adjustment since then. In particular, globalization raises new challenges and opportunities for fiscal policy; balance sheet variables have become more important, as debt and capital account crises have made clear; institutions are increasingly seen as a key determinant of development success and macroeconomic stability; and greater emphasis is placed on helping low-income countries scale-up productive expenditure and make good use of increased aid…”
