Lessons of fiscal adjustment - selected proceedings from a World Bank seminar

The paper reports on the findings regarding fiscal reform, a crucial component of the Bank's structural adjustment lending. Based on an assessment, dated 1997, of fiscal adjustment in twenty six countries, and, amplified by the Seminar of experts, the paper focuses on two aspects of fiscal adjustment: the political economy of fiscal reform, and budgetary decisions; and, the incentives for, and outcomes of, fiscal discipline. On the first aspect, the need for political commitment, within the governments' highest levels, was emphasized as critical to support reforms, for, evidence suggest that successful adjustment, imply reduction in the public sector wage bill, - controversial to any political arena - and, further indicates, that strong government support, will prod the reforms that, a coalition government might not. On the second aspect, internal incentives for fiscal discipline, and, the balance between a government's allocation of expenditures, and its ability to manage its own fiscal processes, and institutions, were examined, along with the role of foreign aid in budgetary issues. Several recommendations emerged from the Seminar, mainly, to include poverty alleviation, and equity considerations, in public expenditure reform, and, that adequate indicators for performance monitoring - for both tax, and expenditure reforms -, should be built-in reform programs.