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Fiscal policies—the tools employed by governments related to revenue collection and expenditure—play a crucial role in key development areas. They can help create the conditions for long-term fiscal sustainability, short-term macroeconomic stabilization, economic growth, and poverty and inequality reduction.

Raising tax revenue is essential for countries to fund their development needs and foster economic growth. Tax policies can also address equity concerns and support sustainable growth. On the expenditure side, policies can support long-term development through supporting and protecting human capital and building infrastructure.

Additionally, governments can use tax and expenditure policies to correct market failures and enhance economic efficiency and welfare. This involves aligning taxation and spending with societal objectives, prioritizing the least distortive taxes, focusing on activities with the highest benefit-to-cost ratio, and striving for cost-effectiveness.

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The World Bank

Global Manager, Fiscal Policy and Sustainable Growth Unit in the Macroeconomics, Trade & Investment Global Practice

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External Affairs contact:
Inaê Riveras
External Affairs contact:
Giannina Raffo