Expenditure Ceilings and Fiscal Policy: Swedish Experiences
16 Pages Posted: 25 Mar 2012
Date Written: March 31, 2005
The paper by Hansson Brusewitz and Lindh describes the Swedish reform of the budget process undertaken in the late Nineties and discusses the experiences since then. Central features of the reformed budget process are a “top-down” budgetary process, which assigns a clear role to the Ministry of Finance in setting the budget, multi-year ceilings on nominal expenditure and a medium-term target for the government’s net lending. Such a target, set at 2 per cent of GDP per year on average over the business cycle, primarily aims at reducing public debt in view of the budgetary impact of an ageing population. Hansson Brusewits and Lindh point out that between 1997 and 2004 the expenditure ceiling has contributed to the fall in general government expenditure from 60 to 54 per cent of GDP and has thus helped to stabilize public finances. They conclude that, although such strict budget rules have to some extent provided the Government with incentives to circumvent them, nominal expenditure ceilings have generally functioned well.
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