Fiscal policy for inclusive sustainable development : the role of public expenditure and progressive taxation

This chapter notes the challenging circumstances that developing countries have faced in the post-2008-2009 global finance crisis (GFC) era, and emphasises the dangers of a one-size-fits-all approach to policymaking. Cross-country evidence is merely a guide: country-specific circumstances must determine the ultimate policy details. The key messages the chapter intends to convey are that Southern countries' fiscal policies must be driven essentially by a pro-inclusive growth agenda; hence, Southern countries should: (a) examine the growth and distributional impacts of the size and composition of public expenditure and revenue-raising mechanisms to balance stabilisation and development goals; and (b) build-up their fiscal space to be able to consistently pursue inclusive, growth-oriented counter-cyclical fiscal policy. This chapter is therefore followed by a chapter focusing on ways to enhance fiscal space.