What is fiscal space:
The IMF's approach to fiscal space is reflected in the following definition: fiscal space is "room in a governmentґs 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."
(From Quarterly newsletter: Finance and Development, IMF).
Governments can create fiscal space through the following types of fiscal instruments: 1) external grants, 2) domestic revenue mobiisation, 3) deficit financing and 4) reprioritization and raising efficiency of expenditures. (See Box 1).
UNDP's approach to fiscal space is embodied in the following definition: "Fiscal space is the financing that is available to government as a result of concrete policy actions for enhancing resource mobilization, and the reforms necessary to secure the enabling governance, institutional and economic environment for these policy actions to be effective, for a specified set of development objectives."
(Roy, Heuty and Letouze, 2007, forthcoming).