Fiscal Management in Adjustment Lending

The study assesses the experiences of fiscal measures in sustaining government solvency and reducing deficits. Furthermore the study looks at how World Bank-supported fiscal adjustment worked between 1979 and 1994 in countries that initiated policy reforms supported by structural or sectoral adjustment loans. The main findings of the study are that 1) successful fiscal management requires sustained, long-term effort; 2) lower fiscal deficits are associated with faster economic growth; 3) sustained deficit reductions were achieved primarily through revenue enhancement, while expenditure reduction targets were more elusive; and 4) the fiscal reform component of Bank-supported adjustment lending had only limited success because of the fragmented treatment of fiscal issues and the vague conditionality of loans.

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