Fiscal Space for What? Analytical Issues from a Human Development Perspective

This chapter proposes an analytical framework and policy instruments to secure fiscal space for financing a national development strategy. Our central premise is that the sustainability of policies to create fiscal space is a function of what the fiscal space is used for. This, in turn, depends on the central economic policy challenges and the attendant interventions that need to be financed to secure these challenges. The balance of emphasis placed on the stabilization, allocation, distribution and growth functions of fiscal policy would differ according to the timeframe of the analytical framework and the political economy context within which the interventions are operationalized. Finally the indicators used to assess fiscal solvency and sustainability will be very different if the assessment is carried out on a long-term, as opposed to short-term, analytical context.