Fiscal Adjustment in IMF-supported Adjustment Programmes: The Tanzanian Experience
Rose Aiko*
Download Article | Published On 01/03/2003

Abstract

Fiscal adjustment is an essential element of macro-economic stability and economic growth. Given th1t0 economic growth is the most powerful weapon in the fight for higher living standards, poor growth performance African countries, has been a challenge to economists, policy makers and international development institutions. Sub-Saharan Africa's performance in the 1980s and 1990s was disappointing with much of the region unable to break away from paths of negative or low per capita income growth, high inflation and fiscal deficits, and balance of payments difficulties. In the face of excessive fiscal deficits, balance of payment crises, rapid monetary expansion high inflation and lack of credit to the private sector, the imperative was to embark on adjustment programmed supported by the World Bank and IMF with fiscal reforms aimed at achieving sustainable external balance an macroeconomic stability through restraining aggregate demand; promoting supply and improving economic efficiency. Some countries were able to make progress fiscal reforms gained ground, liberalization. Efforts marked program and numerous countries took steps to eliminate credit controls, and to adopt indirect instruments of money policy. Fiscal adjustments have however become the subject of criticism in recent years, especiaiJy in low i come countries, because they involves trade-offs between stability growth, or stability and social expenditure , which are often not adequately articulated or quantified and evolve distributional issues that are political sensitive. The key issues raised are: (1) to what extent have the W.B.IIMF-supported programmes helped in achieving more sustainable fiscal adjustment? (2) How did the negotiations of adjustment take account of constraints in implementation, explore alternatives and assess the social impacts of key measures? (3) To what extent have t e adjustment programmes contributed to building institutional capacity and fostering ownership? (4) How were 0105 trade-offs considered i.e. how important were efforts to sharply reallocate the budget toward protecting the vulnerable groups? (5) How effective has Bank-Fund collaboration been in addressing public expenditure policy and management and social safety net issues? (6) Do Fund-supported programmes show improvements overtone to take account of lessons learnt?

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