The study uses the concepts of the welfare cost from inflation, and armey curves popularized by MartinrnBailey and Richard armey'; respectively to show that fiscal policy instrument can serve a functionrnfurther than progressively reducing fiscal deficits. In the absence of the abundance of financialrninstitutions monetary policy measures, as tools of short-term economic stabilization, can bernimpotent. The study shows that with fiscal policy measures primarily aimed at progressivelyrnlowering budget deficits, the policy choices for short term macroeconomic stabilization havernseen LDCs rely, in flexibly, on monetary policy measures that have failed to pay any' dividends.rnrnThe study also shows that the potential for fiscal adjustment measures can be exhausted pretty rnquickly and an economy could slump back in to a corner solution on the policy space 9wehre fiscal rnpolicy measures are once only good for reducing fiscal deficits ). The study indicates that less developedrneconomies that constantly put their faith on [short-term policy] measures that require intricaterninstitutional development should realize that those set of measures are dominated by policyrnmeasures that do not require well structured institutions. Nevertheless, it cautions d1ernenthusiasm witl1 which fiscal policyrnrnoptions are reintroduced into the policy choice scene shouldrnnot veil the need for immediate institutional improvement.