Explain the concept of fiscal space.

Explain the concept of fiscal space.

Fiscal space refers to the capacity of a government to finance its budgetary expenditures, including both regular expenses and unexpected or emergency situations, without jeopardizing its fiscal sustainability. It is essentially the room or flexibility a government has to implement fiscal policies, such as increasing spending or reducing taxes, without causing negative consequences for the economy or public finances. Fiscal space is influenced by various factors, including the level of government debt, revenue sources, economic growth, and the ability to access financial markets. Governments with larger fiscal space have more options to address economic challenges and implement policies to promote growth and stability.