In its latest Fiscal Monitor report, the Fund argues that improving the efficiency and targeting of public expenditure could strengthen economic growth without necessarily increasing overall spending.
The report highlights that public spending as a share of GDP has nearly doubled since the 1960s, yet much of it fails to support productivity-enhancing areas such as infrastructure, education, and research. In advanced economies, public investment now represents just 11% of total government spending, compared with roughly 20% in emerging markets.
According to the IMF, most countries could generate 30–40% more value from their existing budgets if they adopted the best practices of the most efficient governments. Redirecting even 1% of GDP from less productive outlays to infrastructure could raise GDP by 1.5% in advanced economies and up to 3.5% in developing ones. Similar effects are seen in education: investing an additional 1% of GDP—by upgrading schools and modernizing curricula—can boost output by as much as 6% in some cases.
The Fund links fiscal efficiency closely to institutional quality and transparency. Nations with strong rule of law and low levels of corruption tend to achieve higher returns from public spending and enjoy greater budgetary flexibility. Countries such as Canada and Sweden have succeeded in reducing spending rigidity through multi-year fiscal planning and systematic program evaluations. By contrast, the IMF warns that excessive budget inflexibility—like mandatory pension or wage expenditures—restricts governments’ ability to shift resources toward growth-oriented policies.
The report also cites examples of successful reforms. The United Kingdom has improved cost control and transparency through its Infrastructure and Projects Authority. Slovakia has achieved savings of up to 7% of its total budget through regular spending reviews, while Serbia increased public investment from 12% to 19% of total spending in just five years thanks to new project management systems.
The IMF estimates that closing efficiency gaps could lift GDP by up to 1.5% in advanced economies and as much as 7.5% in developing ones over the long term.
Within this broader global context, Greece’s 2026 draft state budget offers an interesting case. The Public Investment Program (PIP) is projected to reach €16.7 billion, up from €14.6 billion in 2025—a 14.4% annual increase. Around €9.5 billion will come from national funds, while €7.2 billion is expected from the EU’s Recovery and Resilience Facility.
Total government expenditure is estimated at €86.5 billion, meaning public investment will account for 19.3% of total spending. As a share of GDP—forecast at €260.9 billion—the PIP amounts to 6.4%, more than double the average for advanced economies, which stands around 3% according to IMF data.
However, while the scale of Greece’s investment effort is notable, its efficiency and targeting remain key challenges. A large share of funds continues to be spread across ongoing or replacement projects, rather than directed toward new, high-value initiatives that could boost productivity and long-term growth. The ability to absorb and effectively deploy EU Recovery Fund resources will play a decisive role in determining whether higher spending translates into measurable economic benefits.
Greece has also begun experimenting with new fiscal tools, such as performance-based budgeting and “green budgeting,” which feature in the 2026 draft. Yet these remain largely at a pilot stage and have not yet evolved into the kind of comprehensive efficiency framework that institutions like the IMF advocate.
In short, Greece’s investment program is expanding in size, but its qualitative orientation still lags behind. The international message is clear: governments should prioritize fewer, better-designed expenditures over sheer volume. For Greece, the challenge now is to ensure that increased spending actually fuels sustainable, productivity-driven growth rather than simply adding more projects to an already crowded investment landscape.
