Anja Baum, Andrew Hodge, Aiko Mineshima, Marialuz Moreno Badia, and Rene Tapsoba
INTERNATIONAL MONETARY FUND
According to U.N. estimates, low-income countries will have to increase their annual public
spending by up to 30 percent of GDP to achieve the Sustainable Development Goals (SDGs),
raising the question of whether they can do it all. This paper develops a new metric of fiscal
space in low-income countries that accounts for macroeconomic uncertainty, allowing us to
assess whether those spending needs can be accommodated. Illustrative simulations based on
this methodology imply that, even under benign conditions, the fiscal space available in lowincome
countries is likely insufficient to undertake the spending needed to achieve the SDGs.
Improving public investment efficiency and domestic revenue mobilization can somewhat
narrow the gap but it will require major efforts relative to recent trends.