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Fiscal Rules for the Western Balkans : Wester Balkans Fiscal Rules Overview Paper (Английский)

Fiscal rules have become an important subject of policy debate in the Western Balkans. The risein public debt during the global financial crisis focused attention on strategies for restoring sound public finances, while plans to join the European Union (EU) mean that the countries will need to be in a position to adopt and comply with the EU’s fiscal rules. This paper aims to help the countries make decisions about fiscal rules in the period before they join the EU.Fiscal rules are long-term quantitative constraints on the government’s spending, deficit, debt, orother fiscal aggregate. A few decades ago, only a handful of countries had fiscal rules; now morethan 90 do, including, of course, the member states of the EU. All the countries of the WesternBalkans apart from North Macedonia have established fiscal rules.Fiscal rules are designed to limit the government’s discretion over fiscal policy and thereby to limit the fiscal deficit and the growth of public debt. There is evidence that strong fiscal rules (e.g., those entrenched in the constitution and those for which compliance is monitored by an independent agency) foster fiscal discipline, at least in countries with a tradition of large deficits.The paper suggests five principles to guide economic policy toward fiscal rules in the region: First, more emphasis should be given to ensuring that fiscal rules are widely understood and enjoy the support of a broad range of stakeholders. Second, policy toward fiscal rules should be consistent with accession to the EU, though the rules should be simpler than the EU’s, the debt limits should be lower, and the changes that are prioritized should be those that will be beneficial even if accession to the EU is delayed (a no-regrets approach). Third, limits should not be mistaken for targets. For example, if the deficit limit is 3 percent of GDP, it should not be assumed that a deficit of 3 percent is usually reasonable. During economic booms, a surplus may be appropriate.Fourth, the aspects of public financial management that support the implementation offiscal rules, including independent statistical agencies and monitoring institutions, shouldcontinue to be improved. This will be beneficial no matter which rules are in place.Fifth, and somewhat more technically, the rules and targets in place should both establisha long-term objective—normally for public debt—and specify the steps that should betaken in the short term—normally in public spending or the deficit—to ensure that progressis made in achieving the long-term objective.

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