Fiscal space

Fiscal space is a relatively new term^[1] that refers to the flexibility of a government in its spending choices, and, more generally, to the financial well-being of a government. Peter Heller (2005) defined it “as room in a government’s budget that allows it to provide resources for a desired purpose without jeopardizing the sustainability of its financial position or the stability of the economy.” ^[2]

There are different exact definitions for the term, and different metrics on how to measure it. The most influential definitions of the term come from international institutions, e.g., the International Monetary Fund (IMF) and the World Bank, the United Nations agencies, e.g., United Nations Development Program, World Health Organization and UNICEF, and the aid organizations, e.g. Organisation for Economic Co-operation and Development.

The crucial point of debate is in how resources that define the 'fiscal space' should be viewed and thus calculated. In particular, unlike the IMF-World Bank,^[3][4] the UN agencies advocates defining it in relation to the extent to which a government can mobilize resources to a means to combat poverty and achieve the Millennium Development Goals.

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