Options for spending fiscal resources have evolved from measures to address immediate health needs, to addressing the economic fall-out from social distancing measures and lockdown, and to building the foundations for more resilient, climate-friendly, gender-sensitive and transformative economic recovery. However, the fiscal resources available to low-income countries (LICs) remain extremely limited, pushing governments to be highly selective in deploying the interventions that would have the most positive short-term and long-term impact.

This paper reviews 94 cross-country, regional and country-level empirical and descriptive studies to identify evidence on fiscal multipliers – the output growth impact of fiscal policy – to provide evidence-based insights to low- and middle-income countries on using fiscal interventions to have the most impact in boosting inclusive, gender sensitive and sustainable economic growth. Across countries and all else being equal, a 1% increase in public expenditure tends to increase output by 1%, or a fiscal multiplier close to 1. In reality, countries are not equal, and specific characteristics and economic circumstances influence the effectiveness of fiscal policy on stimulating growth.