Expenditure reductions in developing countries revisited

During the 1980s, various factors have caused developing countries to reduce government expenditures in real terms. In many countries, rising debt service burdens have squeezed non‐debt service expenditures. This paper examines data for 24 developing countries, to see which kinds of expenditures were cut and which were protected. In general, it finds that capital expenditures were reduced more than current expenditures. Among the various sectors of government expenditure, the social sectors and defence were relatively protected, while the productive and infrastructure sectors bore a relatively larger burden of the adjustments.