Strengthening Chile's Rule-Based Fiscal Framework

The cornerstone of Chile’s impressive fiscal performance has been its structural balance rule. By insulating public spending from short-term copper price fluctuations and the business cycle, the rule has helped preserve fiscal discipline. However, the implementation of the rule in recent years has revealed certain challenges, and in May 2010, the government established a high-level commission to recommend reforms that could make the rule even more effective. This paper assesses the scope for improving the design and implementation of the structural balance rule in light of best practices and OECD country experience with fiscal rules. This assessment suggests several options to strengthen Chile’s fiscal rule, including by simplifying the calculation of the structural balance; enhancing the rule’s flexibility, transparency and accountability; and complementing it with a medium-term fiscal framework.Commodity prices;Copper;External shocks;OECD;fiscal policy, fiscal rules, fiscal rule, expenditures, expenditure, medium-term fiscal framework, fiscal framework, public spending, fiscal responsibility, fiscal performance, fiscal indicators, public debt, fiscal discipline, fiscal responsibility law, expenditure growth, fiscal objectives, tax revenues, fiscal accounts, fiscal system, government expenditures, mtff, fiscal frameworks, fiscal response, public financial management, fiscal tightening, government spending, fiscal transparency, government expenditure, expansionary fiscal, fiscal surpluses, increase in expenditures, tax collections, fiscal policy rules, fiscal outcomes, fiscal balances, key fiscal indicators, fiscal impact, growth of expenditures, expenditure level, national budget, fiscal reports, fiscal policy rule, expansionary fiscal policy, public spending programs, expenditure frameworks, fiscal position, fiscal stance, tax ratios, fiscal affairs department, higher expenditure, fiscal targets, fiscal reporting, fiscal actions, budget law, expenditure ceiling, fiscal management, fiscal planning, prudent fiscal management, fiscal policy framework, central government budget, fiscal affairs, government budget, fiscal issues, fiscal stability, fiscal responsibility act, expansionary fiscal stance, fiscal sustainability, discretionary fiscal policy, budget balance, public finances, fiscal council, budget deficit, fiscal analysis, fiscal powers, tax rates, fiscal responsibility laws, fiscal variables, budget process, fiscal adjustment, total expenditures, annual budget, fiscal impulse

A Public Financial Management Framework for Resources-Producing Countries

This working paper overviews the challenges posed by resource revenues management and the policy prescriptions to meet them, and focuses on the Public Financial Management (PFM) framework and reforms that resource-producing countries should adopt. The paper outlines a PFM framework and reform path that take into account the institutional diversity of resource-producing countries. In the short term, the proposed reforms highlights the tools that could be implemented even where the PFM system is rather basic, while over the medium and long term they aim at converging with best international PFM practices.Fiscal reforms;Governance;Natural resources;Oil producing countries;Oil production;Public finance;Resource mobilization;Revenue sources;budget law, budget process, budget documents, annual budget, fiscal policy, budget execution, national accounts, pfm system, pfm systems, fiscal strategy, organic budget law, financial management, public financial management, public spending, accountability mechanisms, budgetary institutions, national accounting, general budget, budget execution process, excessive borrowing, budget classification, fiscal plans, public debt, audit institutions, fiscal affairs, fiscal affairs department, budget legislation, public investment, extrabudgetary funds, prudent fiscal policy, government spending, budget constraint, fiscal responsibility, fiscal years, budget management, fiscal policies, annual budget process, budget allocations, accumulation of arrears, fiscal frameworks, budget support, budget estimates, budgetary mechanisms, budgetary funds, fiscal regime, budget deficit, cash budget, national budget, tax administration, fiscal measures, budget preparation, sustainable fiscal policy, fiscal strategies, debt service, budget projections, accounting standards, impact of public spending, government priorities, tax ratios, budgetary procedures, fiscal policy formulation, budget year, internal control, fiscal rules, public expenditure, fiscal institutions, increase in expenditures, fiscal sustainability, tax cuts, budget constraints, budget composition, revenue projections, fiscal accounts, budget formulation, fiscal responsibility laws, tax payments, medium-term fiscal frameworks, long-term fiscal sustainability, tax collections, budget reforms, treasury systems, taxation, expenditure programs, fiscal variables

Rules-Based Fiscal Policy in France, Germany, Italy and Spain

Fiscal rules can help to counteract the deficits and spending biases that too often originate in the political process. Rules that constrain spending--rather than the balance--allow fiscal policy to be countercyclical. Yet the design of effective spending rules is by no means straightforward. Should a rule be real or nominal? How comprehensive should the definition of spending be? What safeguards ensure the credibility of a rule? How do rules work in decentralized systems where regions and states are partially autonomous? France, Germany, Italy, and Spain--countries that could benefit from more emphasis on fiscal rules to constrain spending--are explored here as case studies.