Download Presentation to 2015 WG meeting on OBI results

Results of
(OECD) fiscal rules survey
of PEMPAL countries
Deanna Aubrey
on behalf of BCOP Resource Team
World Bank
24 February 2016
Objectives and Scope of Survey (1)
• The survey aimed to identify which fiscal rules are being
applied by PEMPAL countries, and their key characteristics.
• The fiscal rules component of the OECD Budget Practices
and Procedures Survey was used (30 questions):
• What type of rules are in place (Expenditure, Revenue,
Budget Balance, Debt, Other).
• What are the characteristics of each rule (time span,
coverage, target, legal basis, monitoring and
enforcement).
•
PEMPAL and OECD jointly conducted the full formal OECD
Budget Practices and Procedures Survey in 2012 with 13
PEMPAL countries.
• Some changes between the 2012 and 2016 surveys
identified noting however, only 9 countries common to
both surveys.
Objectives and Scope of Survey (2)
•
•
•
•
•
The survey was issued electronically by our survey expert,
who prepared the report through online suvery instrument
(Survey Monkey).
Pre-meeting surveys implemented by PEMPAL are informal
instruments. No quality assurance of results is undertaken
or support for understanding of translated concepts given
(like for OECD formal surveys).
Thus results should be treated with caution and only used
as a guide to facilitate further discussions between
countries.
Only key results presented here – full report will be posted
on website with meeting materials.
Of the 18 countries registered to attend this meeting, 16
countries completed the survey. A great response – thank
you!
Key Changes in Fiscal Rules
• More PEMPAL countries have applied fiscal rules since 2012
driven in part by EU, EU Accession and IMF requirements.
• Only 7 out of 13 countries reported having fiscal rules in 2012 survey,
compared to 15 out of 16 in 2016 survey.
• For example, in the 2012 survey, Montenegro and Uzbekistan
reported they had no fiscal rules, but now report they have
established them. Belarus also reported in 2012 it only had debt
rules, but has since adopted more rule types.
• Reforms in some countries are underway. For example:
• Croatia reported amendments to the Fiscal Responsibility Act in 2014
to create a new temporary structural balance rule as a % of GDP as
part of an EU adjustment plan. Moldova’s budget balance rule will
apply from 2018.
• Macedonia reported that fiscal rules have not been adopted entirely,
but the Government has submitted a proposal to the Parliament to
amend the Constitution to establish the budget balance and debt
rule.
Types of Rules Applied
Country
Armenia
Belarus
Federation BiH
Bulgaria
Croatia
Georgia
Kyrgyz Republic
Macedonia
Moldova
Montenegro
Romania
Russian Federation
Serbia
Tajikistan
Ukraine
Uzbekistan
Total Rule Type
None
X
Expenditure
Revenue
X
X
X
X
X
X
X
X
1
X
X
X
10
X
X
X
X
X
X
7
Budget
Balance
X
X
X
X
X
X
X
X
X
X
X
X
X
X
14
Debt
X
X
X
X
X
X
X
X
X
X
X
X
12
PART 1: EXPENDITURE RULE
RESULTS
What targets are used for Expenditure Rules?
•
10 countries report they have expenditure rules: Belarus, FBiH, Bulgaria,
Croatia, Georgia, Romania, Russian Federation, Tajikistan, Ukraine,
Uzbekistan - compared to only 3 in the 2012 OECD survey.
Number of Countries
6
5
4
3
2
Bulgaria
Russian Federation
Tajikistan
Ukraine
Uzbekistan
Bulgaria
Croatia
Belarus
Georgia
Romania
1
0
Nominal
Expenditure
Ceiling
•
Real
Expenditure
Ceiling
Nominal
Expenditure
Growth Rate
Real
Specific
Expenditure Expenditure to
Growth Rate
GDP ratio
The most common target is a nominal expenditure ceiling (used by 5
countries).
Characteristics of Expenditure Rules (1)
• Most expenditure rules are set in primary legislation
except for Uzbekistan (secondary); Belarus (secondary
and primary); Bulgaria and Romania (EU international
treaty); and Romania also reporting some rules under
internal rules/policies.
• Most expenditure targets are reported to be temporary
(11 targets are temporary compared to 5 permanent).
• Most rules require a proposal with corrective measures,
in the case of non-compliance. Exceptions include
Belarus, Bulgaria, Croatia, who have no enforcement
procedures in place.
Characteristics of Expenditure Rules (2)
• Some countries reported flexibility in certain types of
expenditure rules.
• For example Belarus, Georgia, Romania for specific
expenditure to GDP ratio target.
• For Croatia, it has some flexibility in applying nominal
expenditure growth rate target, (for disasters, large
economic disturbances) as specified in Amendments
to the Fiscal Responsibility Act as long as fiscal
sustainability is not threatened in medium term.
• Bulgaria, Russian Federation, FBiH, Ukraine allow no
flexibility on expenditure rules applied.
Examples of Expenditure Rules
• Some examples reported by countries:
• Belarus - education at least 5% of GDP, health not less than 4% of GDP,
public debt service no more than 10% of revenues, region debt servicing
no more than 15% of local revenues excluding subsidies.
• FBiH – amount of current income must be equal to or greater than current
expenditure. Accumulated deficit from previous period must be covered in
next 5 years.
• Bulgaria – expenditure must not exceed 40% of GDP. Annual expenditure
growth shall not exceed reference growth of potential GDP (as determined
by EC).
• Croatia – expenditure growth rate of general budget must not exceed
projected growth rate of GDP in current prices.
• Romania – wages expenditures for public employment in 2016 has a target
of 7.7% of GDP.
• Russian Federation – federal budget expenditures has nominal target in
rubles each year, over the next three years.
• Georgia – ratio of the sum of the consolidated budget expenses and the
growth of non-financial assets to GDP not more than 30%.
PART 2: REVENUE RULE
RESULTS
What constraints/limits are imposed by Revenue
Rules?
Number of Countries
• 7 countries report they have revenue rules: Belarus, Bulgaria, Georgia,
Romania, Russian Federation, Ukraine, Uzbekistan – compared to only 2
countries in the 2012 OECD Survey.
4
Bulgaria
3
2
Russian Federation
Ukraine
Belarus
Romania
Uzbekistan
1
0
Rule imposes
Rule imposes
The rule imposes
constraints on the
constraints on
an upper limit on
allocation of higher
Increase or
the tax-to-GDP
than expected decrease in the taxratio
revenues
to-GDP ratio
Other
Characteristics of Revenue Rules
• Most revenue rules are set in primary legislation, except for
Belarus and Uzbekistan (secondary).
• Some constraints/limits are temporary and some permanent.
Belarus, Russian Federation, Ukraine and Uzbekistan are
temporary. Bulgaria, Georgia and Romania are permanent.
• Most enforcement procedures are not defined ex ante except in
Georgia and Romania where corrective measures must be
implemented.
• There is limited flexibility during economic crises except in
Georgia and Romania.
• For example the Georgia, the Government has the right to
request to permanently increase tax rates for 3 years. In this
case a referendum is not held.
Examples of Revenue Rules
Some examples reported by countries:
• Russian Federation - all oil and gas revenues received in excess of
a certain level are sent to reserve fund.
• Belarus - there is a target to reduce the tax burden to 26% of GDP
by 2016.
• Georgia - the organic budget law prohibits the growth of any tax
rate, except excise tax.
• Bulgaria – surplus revenues for the current budget year may not
serve as a source of additional expenditure.
• Romania – For the major budgets (state, state social insurance,
and special funds), laws and rules impose different tax
percentages.
PART 3: BUDGET BALANCE
RULE
What targets are used for Budget Balance Rules?
Number of Countries
• 14 countries report they have budget balance rules –
compared to only 5 countries in 2012 OECD survey.
9
8
7
6
5
4
3
2
1
0
Bulgaria
Croatia
Romania
FBiH
Ukraine
Bulgaria
Belarus
Bulgaria
Georgia
Macedonia
Moldova
Montenegro
Russia
Serbia
Specific budget Given improvement Specific budget
Specific budget
balance in nominal of the structural or balance as % of GDP balance as a % of
terms
cyclically-adjusted in cyclically-adjusted
GDP
budget balance
or structural terms
Specific budget
balance as a % of
GDP wihtin a range
of possible values
depending on
growth
• The most common target is a specific budget balance as % of
GDP (used by 8 countries).
Characteristics of Budget Balance Rules
• Most budget balance rules are set in primary legislation except for
Macedonia (Constitution) and Uzbekistan (secondary).
• Most budget balance targets are permanent except for those in
Belarus, Russian Federation, Ukraine and Uzbekistan which have only
been set for a temporary time period.
• Most enforcement procedures are in the form of corrective
measures (presented to Parliament or implemented by entity
responsible for breach).
•
•
Exceptions Macedonia, Russian Federation and Serbia whose enforcement
procedures are not defined ex ante.
Bulgaria noted an automatic correction mechanism applies, and that for
European Union countries, the budget deficit or budget surplus are defined
in structural terms, to ensure they take into consideration business cycle
swings and filter out the effects of one-off and other temporary measures.
• 7 countries reported there was flexibility in budget balance rules
(for example in cases of natural disasters and external shocks) and 5
countries reported there was not.
Examples of Budget Balance Rules
Some examples reported by countries:
• Belarus - consolidated budget deficit not more than 1.5% of GDP.
• Bulgaria (based on EC rules) - Medium Term Budgetary Objective (MTO) for
structural deficit of general government on annual basis should not exceed
0.5% of GDP, or 1% provided the amount of consolidated debt of general
government is below 40% of GDP, and risk to long-term sustainability of public
finances is low. The MTBO for the structural deficit on an annual basis shall be
updated every three years. The general government balance objective shall be
to reach and/or maintain a nil or positive balance. The general government
deficit on an annual basis, may not exceed 3 per cent of GDP. The annual
budget deficit on a cash basis may not exceed 2% of GDP.
• Romania (based on EC rules) – Structural budget deficit to 1% of GDP for 2016,
MTO includes budgetary effort to eliminate the risk of exceeding the 3% budget
deficit of GDP set in the Accession Treaty, and which will ensure long-term
stability of public finances.
• Serbia – the target annual fiscal deficit shall amount to 1% of GDP in medium
term.
Examples of Budget Balance Rules
Some examples reported by countries (continued):
• Croatia (based on EC rules) – The structural balance, expressed as a % of GDP,
shall be realized according to adjustment plan to achieve MTO whereby general
budget expenditure growth shall not exceed the potential reference growth
rate of the GDP, increased by the expected rise in prices. Inter-annual decrease
of the structural balance must be at least 0.5% of GDP, while ensuring that the
general budget deficit does not exceed 3% of GDP and public debt does not
exceed 60% of GDP. However, the structural balance rule is currently not
applied since the Croatian Government has not adopted an adjustment plan
because it is awaiting EU Council recommendations.
• Macedonia, Montenegro, and Georgia – budget deficit must not exceed 3% of
GDP.
• Moldova – budget deficit maximum level 2.5% of GDP, excluding grants.
• Russian Federation – Estimated deficit of 1% of GDP used for determining
maximum amount of expenses.
PART 4: DEBT RULES
What targets are used for Debt Rules?
• 12 countries report they have debt rules – compared to only 5
countries in the 2012 OECD survey.
8
Belarus
Bulgaria
Kyrgyz
Republic
Macedonia
Montenegro
Serbia
Ukraine
Number of Countries
7
6
Georgia
Romania
Ukraine
5
4
3
2
FBiH
Ukraine
Bulgaria
1
0
Specific amount Specific debt-to- Given reduction Ceiling for the Debt can only be
of debt in
GDP ratio
in the debt-to- Government debt incurred for net
nominal terms
GDP ratio
in level or as a %
investment
of GDP
acquisition
• The most common target is the ceiling for debt in level or as
% of GDP (used by 7 countries).
Characteristics of Debt Rules
• Debt rules are most commonly set in primary legislation except Macedonia
(Constitution), Kyrgyz Republic (secondary), and Romania (international treaty
and internal rules/policies).
• Most debt targets are permanent.
• Most countries (6 out of 9) reported that the rule does not allow for
flexibility in economic crises,
• except Kyrgyz Republic (changes to rule can be made in bylaws); Ukraine
(in emergencies, a separate decision can be made by Government); and
Macedonia (flexibility is permitted in event of natural disasters and
external shocks that threaten national security, citizens health, or in case
of significant decline in real GDP).
• The most common enforcement measure is the requirement to submit a
proposal with corrective measures to Parliament for non-compliance
(Bulgaria, Montenegro, Romania, Serbia, Ukraine).
• In FBiH and Bulgaria the government entity responsible for the over run
must also implement corrective measures.
• Enforcement procedures are not defined ex ante for some countries i.e.
Belarus, Georgia and Macedonia.
Examples of Debt Rules
Some examples reported by countries:
• Belarus – the amount of external public debt not more than 25% of GDP;
domestic public debt not more than 20% of GDP; amount of debt of regions not
more than 80% of the revenues of local budgets without targeted subsidies.
• Georgia, Macedonia, Montenegro, Bulgaria, Romania, Kyrgyz Republic – the
public debt must not exceed 60% of GDP.
• Serbia - General government debt, excluding liabilities for restitution, shall not
exceed 45% of GDP.
• Bulgaria – If the nominal amount of consolidated general government debt
exceeds 60% of GDP, the medium-term budgetary forecast and the State
Budget Act shall set out measures aimed at annually decreasing that debt by at
least 5% of the excess ascertained, until the target of 60% is reached.
• Uzbekistan - maximum amount of public debt is determined annually by
Parliament when adopting the state budget and state trust funds
Thank you for your attention!