Brazil: Technical Assistance Report-Strengthening the Framework for Subnational Borrowing
IMF Staff Country Reports, September 24, 2019
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Bibliographic details
- Published: September 24, 2019
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781513514710.002
Summary / Key findings
- The report highlights the need to strengthen the framework for substantial borrowing by subnational governments.
- A significant change in the institutional framework is needed to impose hard budget constraints and promote stable and sustainable policies.
- The proposed approach is based on demanding greater transparency and accountability by subnational governments, while also making the framework more flexible.
- If adopted, the framework is expected to:
- introduce risk sharing among states,
- operate within an enhanced insolvency framework,
- tighten fiscal rules,
- put more emphasis on market incentives.
- Framework changes need to be accompanied by progress on addressing fiscal pressures from rising budget rigidities (including pensions) and excessive tax incentives (the so-called tax wars).
- Recommendation to create an independent fiscal council to monitor fiscal performance and compliance of fiscal rules by subnational governments; one possibility is to add this mandate to the Independent Fiscal Institution while strengthening its independence and providing enough resources.
Policy recommendations and institutional reforms
- Demand greater transparency and accountability by subnational governments.
- Make the borrowing framework more flexible while imposing hard budget constraints.
- Introduce risk sharing among states within an enhanced insolvency framework.
- Tighten fiscal rules and emphasize market incentives to reinforce discipline.
- Address fiscal pressures from:
- rising budget rigidities, including pensions,
- excessive tax incentives ("tax wars").
- Establish an independent fiscal council (or expand the mandate of the Independent Fiscal Institution) with strengthened independence and sufficient resources to monitor fiscal performance and compliance.
Expected outcomes and mechanisms
- Stronger hard budget constraints for subnational governments.
- Enhanced insolvency framework that facilitates risk sharing and orderly adjustment.
- Tighter fiscal rules and increased use of market incentives to signal risks and enforce discipline.
- Improved transparency and accountability to support market-based monitoring and corrective measures.
Publication and metadata
- Publication title: Brazil: Technical Assistance Report-Strengthening the Framework for Subnational Borrowing
- Date: September 24, 2019
- Series: Country Report No. 2019/302
- Issue: 302
- Volume: 2019
- Pages: 56
- DOI: https://doi.org/10.5089/9781513514710.002
- Stock No: 1BRAEA2019003
- ISBN: 9781513514710
- ISSN: 1934-7685
- Subjects: Debt service, Expenditure, External debt, Fiscal policy, Fiscal rules, PFM legal and regulatory frameworks, Public financial management (PFM), Revenue administration
- Keywords: cash management, central bank, CR, debt limit, debt relief, Debt service, financial situation, Fiscal rules, FRR regime, Global, government Finance Statistics Manual, government indebtedness, government organization, ISCR, national government, PFM legal and regulatory frameworks, Recuperaçâo Fiscal
International Monetary Fund. Fiscal Affairs Dept. "Brazil: Technical Assistance Report-Strengthening the Framework for Subnational Borrowing", IMF Staff Country Reports 2019, 302 (2019).
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- 1braea2019003