{
  "title": "Budget Processes and Commitment to Fiscal Discipline",
  "publication": "IMF Working Papers, July 1, 1996",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/30/budget-processes-and-commitment-to-fiscal-discipline-1881",
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  "summary": "This paper develops a political-economy model of the budget process focusing on the common pool problem of the public budget.",
  "sections": [
    {
      "heading": "Political-economy model of the budget process",
      "content": "- Develops a political-economy model focused on the common pool problem of the public budget.\n- Identifies an externality: public spending is often targeted at individual groups while the tax burden is widely dispersed, creating a bias toward excessive expenditures and debt.\n- Emphasizes the role of actors with particularistic interests (spending ministers, members of parliament) in driving the bias."
    },
    {
      "heading": "Centralization as a corrective mechanism",
      "content": "- Argues that introducing elements of centralization in the budget process can reduce the deficit bias.\n- Defines centralizing elements as institutional structures that strengthen a comprehensive (whole-budget) view over the particularistic views of spending ministers and MPs.\n- Identifies the desired effect: reduce the externality from fragmented spending decisions and align incentives toward fiscal discipline."
    },
    {
      "heading": "Evidence from EC countries and empirical findings",
      "content": "- Uses examples from EC countries to illustrate variation in the presence or absence of centralizing elements in budget processes.\n- Presents empirical evidence supporting the claim that centralizing elements reduce the deficit bias."
    },
    {
      "heading": "Policy implications and models for reform",
      "content": "- Concludes with models for reform of the budget process aimed at strengthening centralizing elements.\n- Implied policy directions:\n  - Strengthen institutions that provide a comprehensive view of the budget (central finance ministry roles, aggregate controls).\n  - Reform budget processes to limit the ability of particularistic actors to generate common-pool spending externalities.\n  - Use institutional design to align decentralized spending incentives with aggregate fiscal constraints."
    },
    {
      "heading": "Subjects and keywords covered",
      "content": "- Budget execution and treasury management\n- Budget planning and preparation\n- Expenditure\n- Fiscal law\n- Fiscal policy\n- Government debt management\n- Public financial management (PFM)\n- Keywords: Budget planning and preparation, budget process, budget proposal, EC government, finance ministry, spending minister, WP\n\nBudget Processes and Commitment to Fiscal Discipline, Working Paper No. 1996/078.\n\n---\n\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/30/budget-processes-and-commitment-to-fiscal-discipline-1881"
    }
  ],
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    "Published: July 1, 1996",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451850079.001",
    "Develops a political-economy model focused on the common pool problem of the public budget.",
    "Identifies an externality: public spending is often targeted at individual groups while the tax burden is widely dispersed, creating a bias toward excessive expenditures and debt.",
    "Emphasizes the role of actors with particularistic interests (spending ministers, members of parliament) in driving the bias.",
    "Argues that introducing elements of centralization in the budget process can reduce the deficit bias.",
    "Defines centralizing elements as institutional structures that strengthen a comprehensive (whole-budget) view over the particularistic views of spending ministers and MPs.",
    "Identifies the desired effect: reduce the externality from fragmented spending decisions and align incentives toward fiscal discipline.",
    "Uses examples from EC countries to illustrate variation in the presence or absence of centralizing elements in budget processes.",
    "Presents empirical evidence supporting the claim that centralizing elements reduce the deficit bias.",
    "Concludes with models for reform of the budget process aimed at strengthening centralizing elements.",
    "Implied policy directions:",
    "Budget execution and treasury management",
    "Budget planning and preparation",
    "Expenditure",
    "Fiscal law",
    "Fiscal policy",
    "Government debt management",
    "Public financial management (PFM)",
    "Keywords: Budget planning and preparation, budget process, budget proposal, EC government, finance ministry, spending minister, WP"
  ],
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