Fiscal Dimensions of Sustainable Development
Prepared for
World Summit on Sustainable Development
Johannesburg, August 26–September 4, 2002
by
Sanjeev Gupta
Michael Keen
Benedict Clements
Kevin Fletcher
Luiz de Mello
Muthukumara Mani
of the Fiscal Affairs Department
INTERNATIONAL MONETARY FUND
Washington, D.C.
2002
© 2002 by the International Monetary Fund
ISBN 1-58906-159-4
International Standard Serial Number (ISSN): 0538-8759
Cataloging-in-Publication Data
Fiscal dimensions of sustainable development / prepared by Sanjeev Gupta…
[et al.] — Washington, D.C. : International Monetary Fund, Fiscal Affairs
Dept., 2002.
p. cm. — (Pamphlet series, 0538-8759) ; no. 54
Includes bibliographical references.
ISBN 1-58906-159-4
1. Fiscal policy. 2. Sustainable development. 3. International Monetary Fund. I. Gupta, Sanjeev. II. International Monetary Fund. Fiscal Affairs Dept. III. Pamphlet series (International Monetary Fund) ; no. 54 HJ192.5.F37 2002
The views expressed in this pamphlet, including any legal aspects, are those of the authors and should not be attributed to Executive Directors of the IMF or their national authorities.
Cover design and typesetting: IMF Graphics Section
August 2002
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Contents
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Preface
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Introduction
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Fiscal Policy and Growth
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Economic Growth, Sustainable Development, and the Millennium Development Goals (MDGs)
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Fiscal Balances and Growth
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Fiscal Policy, Incentives, and Growth
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Revenue Composition and Growth
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Expenditure Composition and Growth
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Many Countries Fall Short
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Fiscal Policy for a Sustainable Environment
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Fiscal Policy, Human Development, and the MDGs
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Public Spending on Education and Health and the MDGs
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Social Safety Nets and Poverty and Social Impact Analysis
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Governance and Sustainable Development
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Moving Forward
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Developing Countries
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International Community
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International Financial Institutions
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References
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Boxes
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1. Environmentally Harmful Subsidies
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2. The Forestry Sector in IMF-Supported Programs
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Figures
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Benefit Incidence of Public Spending on Education and Health Care in Developing and Transition Countries
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Changes in Education and Health Care Spending in Countries with IMF-Supported Programs, 1985–2000
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Annual Percentage Change in Education and Health Care Spending and Social Indicators in Countries with IMF-Supported Programs, 1985–2000
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Tables
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Central Government Deficit and Debt, by Country Groups
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Public Health Care Spending and Life Expectancy, by Country Groups
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Public Education Spending and Literacy Rate, by Country Groups
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Global Costs of Public Subsidies per Year, 1994–98
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The following symbols have been used throughout this pamphlet:
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… to indicate that data are not available;
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— to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist;
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- between years or months (for example, 1998–99 or January-June) to indicate the years or months covered, including the beginning and ending years or months;
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/ between years (for example, 1998/99) to indicate a crop or fiscal (financial) year.
“Billion” means a thousand million.
Minor discrepancies between constituent figures and totals are due to rounding.
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.
Preface
The achievement of sustainable development—combining economic development, social development, and environmental protection—is a key challenge facing the international community. To this end, progress will be needed in a number of different policy areas, with the right mix of policies varying from country to country.
The purpose of this pamphlet is to explore the relationships between fiscal policy—the range of the government’s taxing and spending decisions—and the economic, social, and environmental aspects of sustainable development. It also addresses how the IMF seeks to promote sustainable development in its fiscal policy advice. Fiscal policy is central to the work of the IMF, whose mandate is to promote international monetary cooperation, the balanced growth of international trade, exchange stability, and orderly exchange arrangements. Fulfilling this mandate is the IMF’s primary contribution to sustainable development.
This pamphlet is the outcome of a collaborative effort of the staff of the Fiscal Affairs Department’s Expenditure Policy Division and Environmental Team. Erwin Tiongson and Shamit Chakravarti provided statistical and computational assistance, and Suzanne Alavi, Amy Deigh, and Meike Gretemann assisted in revising the final version of the pamphlet. The authors are grateful to Teresa Ter-Minassian, Director of the Fiscal Affairs Department, for guidance and suggestions on earlier drafts. Other colleagues in the Fiscal Affairs Department, as well as in other IMF departments, also provided insightful comments on earlier drafts. The pamphlet was edited by Paul Gleason of the External Relations Department and typeset by Choon Lee of the Graphics Section of the Technology and General Services Department. The authors bear the sole responsibility for any remaining errors and omissions.