{
  "title": "The Secret Weapon for Fiscal Strength—Strong Budget Institutions",
  "publication": "IMF Blog, May 29, 2014",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2014/05/29/the-secret-weapon-for-fiscal-strength-strong-budget-institutions",
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  "summary": "The study identifies 12 institutions that are commonly viewed as important for the effectiveness of fiscal policy.",
  "sections": [
    {
      "heading": "Core findings on institutions and fiscal performance",
      "content": "- The study identifies 12 institutions that are commonly viewed as important for the effectiveness of fiscal policy.\n- Institutions are grouped into three groups: those that help identify fiscal challenges, those that help develop appropriate adjustment plans, and those that support implementation of adjustment plans.\n- Evidence from G-20 country analysis indicates:\n  - Countries with stronger institutions overall seem to recognize the need for fiscal adjustment, in line with the IMF’s assessment of the required consolidation effort.\n  - Countries with strong implementation institutions carry out much more of their announced adjustment plans than countries with weak institutions.\n  - Countries with strong budgetary planning institutions tend to develop and announce their adjustment strategies more rapidly.\n  - Countries with strong planning institutions protect capital expenditure more successfully during consolidation."
    },
    {
      "heading": "Examples of institutional functions and assessment approach",
      "content": "- The fiscal reporting system is highlighted as an important institution for identifying fiscal difficulties; weaknesses include incomplete coverage of the public sector, untimely reporting, and limited assurances of data integrity.\n- For all 12 institutions the study set out criteria to assess relative institutional strength, encompassing processes, procedures, systems, legal frameworks, and organizational entities."
    },
    {
      "heading": "Evidence limitations and caveats",
      "content": "- The analysis covers a relatively small group of countries and a short period: 2010–13.\n- Establishing causality in institutional analysis remains problematic.\n- The analysis does not determine whether the fiscal policy effort undertaken was appropriate for the stage of the economic cycle.\n- Further analysis and confirmation of results will be necessary in the coming years."
    },
    {
      "heading": "Reform patterns across G-20 countries",
      "content": "- G-20 countries are pursuing reforms, especially those under fiscal pressure after the crisis, but reform effort has been uneven across country groupings and across institutions.\n- Advanced G-20 economies, especially those in Europe, and countries with specific consolidation plans were the strongest reformers.\n- Emerging market economies did relatively well on improvements in fiscal risk management and performance orientation.\n- Overall there has been a widening of the gap in institutional strength between advanced and emerging G-20 countries."
    },
    {
      "heading": "Popular reforms and those lagging",
      "content": "- Popular and consequential reforms since the crisis include:\n  - Independent fiscal agencies\n  - Fiscal objectives and rules\n  - Medium-term budgetary framework\n- These reforms have contributed to less biased economic forecasts, more credible fiscal frameworks, and more sustainable fiscal policy; they also facilitated fiscal policy coordination in the eurozone.\n- Reforms requiring greater administrative or political effort have seen less progress, including:\n  - Changes in fiscal reporting\n  - Improvements in fiscal risk management\n  - Changes to intergovernmental financial arrangements\n- Extra-budgetary funds and other earmarks, captured under the “budget unity” institution, continue to limit budget flexibility in many countries."
    },
    {
      "heading": "Policy implication and priorities",
      "content": "- The country evaluations set out priorities for further institutional reform for each of the G-20 countries.\n- Overall message: institutions matter, and G-20 countries would do well to continue to reinforce their institutional architecture for fiscal policymaking to improve recognition of fiscal challenges, design of adjustment strategies, and implementation of consolidation plans.\n\nSource: IMF blog—The Secret Weapon for Fiscal Strength—Strong Budget Institutions\n\n---\n\n Content in this bundle\n\n- Budget Institutions in G-20 Countries: An Update; IMF Policy Paper, April 7, 2014\n  - Budget Institutions in G-20 Countries: An Update; IMF Policy Paper, April 7, 2014 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Budget Institutions in G-20 Countries: An Update; IMF Policy Paper, April 7, 2014 (PDF){rel=\"external\" type=\"application/pdf\"}\n- Budget Institutions in G-20 Countries: Country Evaluations; IMF Policy Paper, April 7, 2014\n  - Budget Institutions in G-20 Countries: Country Evaluations; IMF Policy Paper, April 7, 2014 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Budget Institutions in G-20 Countries: Country Evaluations; IMF Policy Paper, April 7, 2014 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- https://www.imf.org/wp-content/uploads/2014/05/fad-twelvebudgets-v2.jpg\n- https://www.imf.org/wp-content/uploads/2014/05/fad-charts-a-and-b.jpg\n- https://www.imf.org/wp-content/uploads/2014/05/fad-charts-c-and-d.jpg\n- https://www.imf.org/wp-content/uploads/2014/05/fad-chart-e.jpg\n\nSource: https://www.imf.org/en/blogs/articles/2014/05/29/the-secret-weapon-for-fiscal-strength-strong-budget-institutions"
    }
  ],
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    "Authors: Holger van Eden",
    "Published: May 29, 2014",
    "The study identifies 12 institutions that are commonly viewed as important for the effectiveness of fiscal policy.",
    "Institutions are grouped into three groups: those that help identify fiscal challenges, those that help develop appropriate adjustment plans, and those that support implementation of adjustment plans.",
    "Evidence from G-20 country analysis indicates:",
    "The fiscal reporting system is highlighted as an important institution for identifying fiscal difficulties; weaknesses include incomplete coverage of the public sector, untimely reporting, and limited assurances of data integrity.",
    "For all 12 institutions the study set out criteria to assess relative institutional strength, encompassing processes, procedures, systems, legal frameworks, and organizational entities.",
    "The analysis covers a relatively small group of countries and a short period: 2010–13.",
    "Establishing causality in institutional analysis remains problematic.",
    "The analysis does not determine whether the fiscal policy effort undertaken was appropriate for the stage of the economic cycle.",
    "Further analysis and confirmation of results will be necessary in the coming years.",
    "G-20 countries are pursuing reforms, especially those under fiscal pressure after the crisis, but reform effort has been uneven across country groupings and across institutions.",
    "Advanced G-20 economies, especially those in Europe, and countries with specific consolidation plans were the strongest reformers.",
    "Emerging market economies did relatively well on improvements in fiscal risk management and performance orientation.",
    "Overall there has been a widening of the gap in institutional strength between advanced and emerging G-20 countries.",
    "Popular and consequential reforms since the crisis include:",
    "These reforms have contributed to less biased economic forecasts, more credible fiscal frameworks, and more sustainable fiscal policy; they also facilitated fiscal policy coordination in the eurozone.",
    "Reforms requiring greater administrative or political effort have seen less progress, including:",
    "Extra-budgetary funds and other earmarks, captured under the “budget unity” institution, continue to limit budget flexibility in many countries.",
    "The country evaluations set out priorities for further institutional reform for each of the G-20 countries.",
    "Overall message: institutions matter, and G-20 countries would do well to continue to reinforce their institutional architecture for fiscal policymaking to improve recognition of fiscal challenges, design of adjustment strategies, and implementation of consolidation plans.",
    "**Budget Institutions in G-20 Countries: An Update; IMF Policy Paper, April 7, 2014**",
    "**Budget Institutions in G-20 Countries: Country Evaluations; IMF Policy Paper, April 7, 2014**",
    "[https://www.imf.org/wp-content/uploads/2014/05/fad-twelvebudgets-v2.jpg](https://www.imf.org/wp-content/uploads/2014/05/fad-twelvebudgets-v2.jpg)",
    "[https://www.imf.org/wp-content/uploads/2014/05/fad-charts-a-and-b.jpg](https://www.imf.org/wp-content/uploads/2014/05/fad-charts-a-and-b.jpg)",
    "[https://www.imf.org/wp-content/uploads/2014/05/fad-charts-c-and-d.jpg](https://www.imf.org/wp-content/uploads/2014/05/fad-charts-c-and-d.jpg)",
    "[https://www.imf.org/wp-content/uploads/2014/05/fad-chart-e.jpg](https://www.imf.org/wp-content/uploads/2014/05/fad-chart-e.jpg)"
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