Can They Do It All? : Fiscal Space in Low-Income Countries / by Anja Baum, Andrew Hodge, Aiko Mineshima, Marialuz Moreno Badia, and René Tapsoba.

Includes bibliographical references and index.

Print version record.

Cover; Contents; I. Introduction; II. Stylized Facts; III. Methodology; IV. Fiscal Behavior; V. Results; Baseline and Macroeconomic Uncertainty; Fiscal Behavior; Financing Mix and the Real Exchange Rate; Policy Scenarios; VI. Conclusions; References; Boxes; 1. Materialization of Contingent Liabilities in LICs: Some Examples; Figures; 1. Incremental Estimated Annual Investment Needs; 2. LICs: Decomposition of Government Debt Evolution; 3. Interest Growth Differentials; 4. LICs: Change in Real Exchange Rate; 5. LICs: Financing Mix of Sample Countries; 6. LICs: Real Interest Rate Differentials.

7. Volatilities of Macroeconomic Variables8. Largest Annual Changes on Tax Revenue; 9. LIC: Real GDP Growth; 10. Financial Depth, 2015; 11. Main Sources of Contingent Liabilities in Low-income Countries; 12. Materialization of Contingent Liabilities: Some Examples; 13. Illustration of Fiscal Space; 14. LICs: Fiscal Space; 15. LICs: Alternative Assumptions on Fiscal Behavior; 16. LICs: Fiscal Space under Different Fiscal Behavior; 17. LICs: Fiscal Space under Different Assumptions on Financing Mix and the Real Exchange Rate; 18. Fiscal Space, Interest Rate Differentials, and the Exchange Rate.

19. Increase of Fiscal Space under Scaling-Up of Public Investment20. Increase of Fiscal Space under DRM; A2.1. LICs: Residual Stock-Flow Adjustments; A3.1. Student's T-Distribution PDF; A3.2. Bolivia: Shocks to the Growth Rate; Tables; 1. Estimation Results for Fiscal Reaction Function; A4.1. Estimation Result for the Fiscal Reaction Function: Further Specifications; Appendices; I. Data; II. Stock Flow Adjustments and Contingent Liabilities; III. The Stochastic Simulation Model; IV. Fiscal Reaction Function: Econometric Issues and Robustness.

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.

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