Fiscal Management of Scaled-Up Aid
66 Pages Posted: 26 Sep 2007
Date Written: September 2007
This paper discusses the role of fiscal policy and fiscal institutions in managing scaled-up aid. In an environment of volatile scaled-up aid, fiscal policy formulation should be anchored in medium-term frameworks, incorporating a longer-term view of potential resource availability and spending plans. There is merit in smoothing expenditures over time so that all programs are adequately funded. The paper argues that wage-bill ceilings should be used in Fund-supported programs only in exceptional cases. The paper also discusses basic reforms for strengthening public financial management systems for effective utilization of scaled-up aid flows.
Keywords: Working Paper, Development assistance, Fiscal policy, Public finance, Government expenditures, Fund policies
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