Fiscal policy and sectoral allocation: sustainable pathways linking ICT, public spending, urbanization, income inequality, economic growth and environmental sustainability in developing economies

In an era of rapid technological change and economic expansion, environmental sustainability has become an increasingly urgent global concern. International initiatives such as the Sustainable Development Goals seek to balance economic growth with environmental protection. Within this context, fiscal policy, sectoral allocation of public spending, and information and communication technology play important roles in shaping sustainable development outcomes. Urbanization, income inequality, unemployment, and economic growth also influence the environmental and socio-economic landscape, making the pursuit of sustainability more complex. This study examines how fiscal policy and sectoral public spending influence environmental sustainability in developing economies, with particular attention to the roles of information and communication technology, urbanization, unemployment, income inequality, and economic growth. Using panel data for 1990–2022, the study applies Driscoll–Kraay standard errors and fully modified ordinary least squares. The findings show that information and communication technology enhances ecological sustainability by increasing the load capacity factor and reducing ecological pressure across the estimated models. In contrast, income inequality worsens ecological sustainability by lowering the load capacity factor and increasing environmental pressure. Public spending on education, health, and social protection is also associated with improved environmental sustainability outcomes, highlighting the importance of inclusive and sustainability-oriented social policies. However, expenditure on agriculture and defence does not show a significant effect on environmental sustainability. By linking these findings to the Sustainable Development Goals, the study emphasizes the importance of strengthening fiscal policy, improving sectoral expenditure priorities, and expanding information and communication technology in developing economies to promote efficient resource allocation and support ecological sustainability.