Publication: Fiscal Responsibility Framework in Croatia : Lessons from the Past, Rules for the Future
Date
2011-07
ISSN
Published
2011-07
Author(s)
World Bank
Abstract
The Croatian Parliament enacted the
Fiscal Responsibility Law (FRL) in November 2010. The law is
designed to ensure long-term fiscal sustainability, fiscal
discipline, and transparency, which have so far not been
successfully enforced in previous legislation. The purpose
of this note is to (i) review efforts to enhance fiscal
management and stability in Croatia; (ii) present relevant
international experience; and (iii) make recommendations for
improving the FRL. The key recommendations stemming from the
review of the law are the following: a) the temporary fiscal
rule that the authorities plan first is appropriate. It
calls for expenditure-based consolidation with clear annual
spending reduction targets because revenue generation cannot
be counted on to balance the budget over the medium term.
The rule should be in place until the general government
balance is reached because it would help reduce the
debt-to-GDP ratio; b) setting up a legally and effectively
independent authority to transparently monitor compliance
with all elements of the fiscal responsibility framework,
especially the fiscal rule, the three-year budget plan, and
fiscal forecasts, is highly recommended; c) if the fiscal
rule is to be effective, it should be supported by
meaningful and enforceable sanctions; and d) also, the FRL
should bind not only the current government and parliament
but also future ones. Thus, as some other countries have
done, the authorities could have considered enacting the FRL
as an organic law with a two-thirds majority.
Citation
“World Bank. 2011. Fiscal Responsibility Framework in Croatia : Lessons from the Past, Rules for the Future. © Washington, DC. http://openknowledge.worldbank.org/entities/publication/9a83cae1-8a06-5661-aae4-234718b7cb8d License: CC BY 3.0 IGO.”