Chapter 4


There are close linkages between fiscal and monetary policies. These will be discussed in
chapter 5 of this module.

 Table 4.10: Government expenditures cuts by sector, 1979-83
 (percentage of cases in each category)

 All Africa Asia Europe Middle Latin
Sector) East America
 (N=57) (N=16) (N=8) (N=6) (N=7) (N=-20)
General public services
 Unprotected 40 43 25 33 43 45
 Protected 23 25 25 17 14 25
 Highly protected 37 31 50 50 43 30
Defence
 Unprotected 25 44 38 0 29 32
 Protected 36 19 25 67 29 36
 Highly protected 39 38 38 33 43 42
Education
 Unprotected 46 38 25 50 29 65
 Protected 22 25 50 25 29 5
 Highly protected 33 38 25 25 43 30
Health
 Unprotected 40 56 63 0 33 26
 Protected 25 25 13 25 17 32
 Highly protected 36 19 25 75 50 42
Economic services2)
 Unprotected 66 53 75 100 71 58
 Protected 13 20 0 0 0 21
 Highly protected 22 27 25 0 29 21


Source: Pinstrup-Andersen, P. et al., "The Impact on Government Expenditure",
 Adjustment with a Human Face, Oxford 1987.


in Cornia G.A et al. (eds.)


I) "Unprotected": percentage decline more than aggregate expenditure;
 "Protected": percentage decline less than aggregate expenditure;
 "Highly protected": percentage increase during cuts in aggregate expenditures.

2) Includes expenditures on agriculture, forestry, fishing, mining, manufacturing, construction, utilities, and
 transport

Note: Total may not add to 100 due to rounding.

4.2 Reduction of public sector employment and wages


By absorbing typically between 20 and 40 per cent (or more) of the government budget,
wages and salaries for public sector employment usually represent the largest single cost
component of public expenditures. Most macro-economic adjustment programmes envisage
reductions in this field, by reducing (or freezing) the level of the real wages of public sector
employees and/or by reducing (or slowing down) the rate of public sector employment.


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