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Introduction: Fiscal Dimensions of Sustainable Development

Guest post by: International Monetary Fund

Article Overview: One of the challenges facing the international community is to achieve sustainable development. Sustainable development has three pillars— economic development, social development, and environmental protection.

Introduction: Fiscal Dimensions of Sustainable Development

One of the challenges facing the international community is to achieve
sustainable development. Sustainable development has three pillars—
economic development, social development, and environmental protection.
1 It entails “. . . balancing the economic, social, and environmental
objectives of society . . . integrating them wherever possible through mutually
supportive policies and practices and making trade-offs where (this)
is not possible. This includes, in particular, taking into account the impact
of present decisions on the options of future generations.”2 In September
2000, the member states of the United Nations underscored the importance
of sustainable development by re-affirming the Millennium Development
Goals (MDGs), a set of time-bound targets for improving human
development along several important dimensions.3
Fiscal policy—the range of the government’s taxing and spending decisions—
has important effects on all aspects of sustainable development:
economic, social, and environmental. Fiscal policy affects sustainable development
through its effects on growth, the environment, and human resource
development. These effects operate at both a macroeconomic level
and through the myriad ways in which governments’ tax and spending decisions
affect incentives to work, spend, save, and invest.
Fiscal policy is central to the work of the IMF. The IMF’s mandate is to
promote international monetary cooperation, the balanced growth of international
trade, foreign exchange rate stability, and orderly foreign exchange arrangements among countries. Fulfilling this mandate is the
IMF’s primary contribution to sustainable development. Within this general
setting, fiscal policy plays a key role in all three main aspects of the
IMF’s work: IMF-supported programs, surveillance, and technical assistance.
In IMF-supported programs in countries facing balance of payments
crises, the IMF often finds that reestablishing the credibility of the
government’s fiscal position is key to restoring sustainable growth. In its
support to low-income countries, the strengthening and reorientation of
tax and spending structures often has a central role. In its surveillance
work, the IMF often focuses on the sustainability of the fiscal position as
a key to preventing crises. Indeed, it is the prevention of crises—the burden
of which often falls on the poor—that the IMF sees as one of its major
contributions to sustainable development. In its technical assistance work,
the IMF responds to countries’ requests for expert advice in improving
their tax and spending systems.
This paper explores the relationships between fiscal policy and sustainable
development and how the IMF seeks to promote sustainable development
in its fiscal policy advice. The paper also discusses lessons learned
thus far and how governments, the international community, and international
financial institutions (IFIs) can more fully support sustainable
development.

Fiscal Dimensions of Sustainable Development
Prepared for
World Summit on Sustainable Development
Johannesburg, August 26–September 4, 2002

Related Articles
  Fiscal Dimensions of Sustainable Development
  Economic Growth, Sustainable Development, and the Millennium Development Goals (MDGs)
  Moving Forward: International Financial Institutions
  Moving Forward: International Community
  Fiscal Balances and Growth

Article Tags: balance of payments, crises, exchange arrangements, exchange rate stability, fiscal policy, fiscal position, foreign exchange rate, future generations, human resource development, imf, importance of sustainable development, international monetary cooperation, international trade, key role, mandate, member states, millennium development goals, supportive policies, three pillars, trade offs



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