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Independent Fiscal Councils
An appropriate balance between fiscal rules and discretionary development spending within the overall borrowing limit of the Fiscal Responsibility and Budget Management Act is critical for macro stability. However, monitoring and compliance of the act at the union and state levels should be left to Parliament and state legislatures. Mobilising public opinion to rebalance the existing institutional arrangements in favour of fiscal responsibility is essential, and this can happen only through parliamentary and legislative discussions on fiscal issues.
The title of our article is inspired by the book, Independent Fiscal Councils: Watchdogs or lapdogs? edited by Roel Beetsma and Xavier Debrun (2018).
A fiscal council is a permanent agency with a statutory or executive mandate to assess publicly and independently from partisan influence government’s fiscal policies, plans and performance against macroeconomic objectives related to the long-term sustainability of public finances, short- to medium-term macroeconomic stability, and other official objectives [...] In addition a fiscal council can perform one or several of the following key functions mentioned above: (i) contribute to the use of unbiased macroeconomic and budgetary forecasts in budget preparation, (ii) facilitate the implementation of fiscal policy rules, (iii) estimate costs of new policy initiatives, and (iv) identify sensible fiscal policy options, and possibly, formulate recommendations. (IMF)1
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