Strengthening Chile's Rule-Based Fiscal Framework

IMF Working Papers, January 1, 2011

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The cornerstone of Chile’s fiscal performance has been its structural balance rule, which insulates public spending from short-term copper price fluctuations and the business cycle.
Implementation challenges emerged in recent years, prompting the government in May 2010 to establish a high-level commission to recommend reforms.
The paper assesses options to improve the design and implementation of the structural balance rule based on best practices and OECD country experience with fiscal rules.

The structural balance rule has helped preserve fiscal discipline by decoupling spending from short-term commodity and cyclical movements.
Recent implementation revealed certain challenges that reduce the rule’s effectiveness.
OECD country experience and best practices provide a basis for assessing potential reforms.

Subject: Expenditure, Fiscal policy, Fiscal rules, Fiscal stance, Metal prices, Prices
Keywords include: accountability, accountability mechanism, authorities' effort, authorities' willingness, central government, Chile's authorities, Chilean government, copper price, delinquent government, fiscal policy rule, Fiscal rules, Fiscal stance, Global, government, government's net, Metal prices, price, public financial management, resource curse, resource revenue management, resource-producing countries, revenues rule, rule, structural balance, structural surplus, transparency, WP