GROUP 1
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Group 1 - COUNTRIES
1. ARMENIA
2. CROATIA
3. BOSNIA AND HERZEGOVINA
4. BULGARIA
5. MACEDONIA
6. MONTENEGRO
7. ROMANIA
8. SERBIA
Including World Bank experts, OECD experts and a representative from
the Swedish MoF
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General Situation Overview by Country
• All countries have fiscal rules (with Macedonia currently in
the Parliament adoption process)
• All EU Member States (Bulgaria, Romania, Croatia) have
complex rules alongside the simple ones, (adopted or
planned), which take into account cyclical adjustments,
while other countries have only simpler rules, and general
escape clauses that lack a thoroughly regulated
implementation.
• Most countries have some form of Maastricht rules in
place (deficit limits in the amount of 3% and debt limits in
the amount of 60% of the GDP respectively), but all
countries have the debt rule. In that respect, a part of the
group discussion focused on how to distinguish the debt
rule from other rules, considering that other rules are
aimed at achieving the final objective, i.e. the debt level.
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Key challenges
•
In most countries of the region the rules are not complied
with.
• Enforcement mechanisms have not been ensured
at all or they have been ensured generally just for
the sake of complying with the requirement to
propose measures to the parliament
•
Even though most countries have escape clauses, these
are incomplete - What exactly does the term "crisis"
mean, i.e. at what point does the sharp decline of GDP
occur?
• The flaw of simple rules is that they are procyclical.
• The flaw of complex rules, which take into account
cyclical developments, is the lack of quality
macroeconomic data, and the time gap between
identifying the occurrence of a crisis/disturbance
and the procedures necessary for fiscal adjustment.
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Key challenges
• Macroeconomic projection capacities are low
in some cases even for basic macro indicators,
and overly optimistic revenue projections
constitute an issue.
• Data-gathering capacities and projections of
cyclic macro indicators are even weaker,
which consequently affects the fiscal rule
implementation monitoring.
• Monitoring the fiscal rule implementation at
sub-governmental levels, extra-budgetary
funds and other parts of the general
government sector is complicated, and
enforcement mechanisms are practically
absent, especially in terms of the
independence of sub-governmental levels.
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Challenges
• It is difficult to maintain rule longevity through
the periods of governmental change.
• The biggest challenge is the lack of proper
political commitment on the one hand, and the
lack of proper political consequence for noncompliance on the other.
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Key factors for success and effective
implementation
• Fiscal rules should be part of a wider public
finance management strategy and they should
be anchored within a mid-term expenditure
framework.
• Macroeconomic projections should be analysed
and criticised by authorities other than the
ministries of finance (fiscal councils, and in some
cases, the central bank).
• Legal basis for fiscal rules is the key for the
countries of the region. In order to generate a
wider political commitment, and a wider public
interest, some countries have decided to embed
fiscal rules in their Constitution (Macedonia):
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Key factors for success and effective
implementation
• There should be a wider commitment to fiscal
discipline and fiscal rules not just within the
government but also in the parliament, and
not just in the budget adoption stage but all
year long, most likely non-applicable (e.g. in
Montenegro during the budget adoption stage
the rules were enforced, but during the year,
the parliament adopted an act which when
implemented exceeded the limits of the
rules).
• The media can be an important factor in
raising public awareness on the importance of
fiscal discipline and consequently in achieving
a higher level of political accountability.
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Key factors for success and effective
implementation
• Simpler fiscal rules, despite their flaws
(particularly the risk of a pro-cyclical fiscal
policy) can play an important psychological
role and provide an additional "excuse" to
the Ministry of Finance to insist on fiscal
discipline, especially because both the
parliament and the public can better
understand simpler rules.
• There is no single rule model applicable to all
countries; specificities are numerous,
particularly in terms of adequate debt level.
That is why it is important for the ministries of
finance to decide which fiscal rules are the most
appropriate for a particular country.
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Thank you/Hvala
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