How can you address fiscal imbalances?

2 Increase revenues

Another way to address fiscal imbalances is to increase government revenues, mainly through taxation. This can generate more income for the government to finance its spending, reduce its borrowing, and lower its debt burden. However, raising taxes can also have adverse effects on economic incentives, competitiveness, and equity. Therefore, tax increases should be based on sound principles and practices, such as efficiency, fairness, simplicity, and transparency.

3 Reform policies

A third way to address fiscal imbalances is to reform policies that affect the government's fiscal position, such as social security, health care, subsidies, and public sector management. This can improve the quality and effectiveness of public spending, enhance the sustainability and adequacy of public revenues, and create a more conducive environment for economic growth and development. However, policy reforms can also entail significant trade-offs, costs, and risks. Therefore, policy reforms should be supported by evidence, consultation, and communication.

4 Seek external assistance

A fourth way to address fiscal imbalances is to seek external assistance, such as loans, grants, or debt relief, from other countries or international institutions. This can provide temporary relief and additional resources for the government to cope with its fiscal challenges, especially in times of crisis or emergency. However, external assistance can also come with conditions, obligations, and dependencies. Therefore, external assistance should be used prudently and strategically, with a clear exit plan and a long-term vision.

5 Foster cooperation

A fifth way to address fiscal imbalances is to foster cooperation among different levels and branches of government, as well as with other stakeholders, such as the private sector, civil society, and the public. This can enhance the coordination, coherence, and accountability of fiscal policies and actions, and foster a shared sense of responsibility and ownership for fiscal outcomes. However, cooperation can also involve complexity, diversity, and conflict. Therefore, cooperation should be based on mutual trust, respect, and dialogue.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?