This series aims to make available to the general public and to economic policy practitioners, a selection of policy papers prepared by the staff of the International Monetary Fund. Papers in the International Economic Policy Review will offer specific policy-relevant analysis, but at a relatively non-technical level. These papers are intended to provide analytical background for IMF-supported programs and more generally to shed light on a range of policy choices facing ministries and central banks.
A range of arguments can be used to justify a fiscal surplus. A surplus may arise out of the government pursuing its allocation function (i.e., in compensating for market failure) or its stabilization function (i.e., in meeting inflation and balance of payments objectives, and in response to business cycles, shocks, and capital inflows). Unsustainable debt and low credibility may also warrant a surplus, as could an aging population. In countries which are heavily dependent on foreign grants, mineral resources and privatization receipts, such special circumstances may provide a particularly strong reason for running a surplus, at least temporarily. When a surplus has been proposed in the context of a Fund-supported program, it is usually with some of the preceding considerations in mind.
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