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This paper studies the impact of expenditure conditionality in IMF programs on the composition of public spending. A granular dataset on different government expenditure conditions covering 115 countries for the 1992-2016 period is compiled. The results support the view that while conditionality on specific elements of spending could help achieve a program’s short-term objectives, it is structural conditionality which delivers lasting benefits. Structural public financial management conditionality (such as on budget execution and control) has proven to be effective in boosting the long-term level of education, health, and public investment expenditures. The results further indicate that conditionality on raising such spending may come at the expense of other expenditures. Finally, the successful implementation (and not mere existence) of the conditionality is crucial for improved outcomes. These findings are relevant for policy makers targeting achievement of the Sustainable Development Goals (SDGs).

Bailouts (Government policy) --- Bankruptcy --- Intervention (Federal government) --- Prevention --- Government policy --- Public Finance --- Fiscal Policy --- International Monetary Arrangements and Institutions --- National Government Expenditures and Health --- National Government Expenditures and Education --- National Government Expenditures and Related Policies: Infrastructures --- Other Public Investment and Capital Stock --- National Government Expenditures and Related Policies: Other --- National Government Expenditures and Related Policies: General --- Public finance & taxation --- Expenditure --- Health care spending --- Public investment spending --- Education spending --- Total expenditures --- Expenditures, Public --- Public investments

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This paper analyses the causes and consequences of fiscal consolidation promise gaps, defined as the distance between planned fiscal adjustments and actual consolidations. Using 74 consolidation episodes derived from the narrative approach in 17 advanced economies during 1978 – 2015, the paper shows that promise gaps were sizeable (about 0.3 percent of GDP per year, or 1.1 percent of GDP during an average fiscal adjustment episode). Both economic and political factors explain the gaps: for example, greater electoral proximity, stronger political cohesion and higher accountability were all associated with smaller promise gaps. Finally, governments which delivered on their fiscal consolidation plans were rewarded by financial markets and not penalized by voters.

Fiscal policy. --- Budget. --- Budgeting --- Expenditures, Public --- Finance, Public --- Tax policy --- Taxation --- Economic policy --- Forecasting --- Government policy --- Macroeconomics --- Production and Operations Management --- Structure, Scope, and Performance of Government --- National Deficit Surplus --- Debt --- Debt Management --- Sovereign Debt --- Fiscal Policy --- Macroeconomics: Production --- National Budget --- Budget Systems --- Measurement and Data on National Income and Product Accounts and Wealth --- Environmental Accounts --- Budgeting & financial management --- Fiscal consolidation --- Output gap --- Budget planning and preparation --- GDP measurement --- Fiscal policy --- Production --- Public financial management (PFM) --- National accounts --- Economic theory --- Budget --- National income --- Canada --- Gdp measurement