Summary of WP/94/149: “Toward a Framework for a Budget Law for Economies in Transition”

Authors of Working Papers are normally staff members of the Fund or consultants, although on occasion outside authors may collaborate with a staff member in writing a paper. The views expressed in the Working Papers or their summaries are, however, those of the authors and should not necessarily be interpreted as representing the views of the Fund. Copies of individual Working Papers and information on subscriptions to the annual series of Working Papers may be obtained from IMF Publication Services, International Monetary Fund, 700 19th Street, Washington, D.C. 20431. Telephone: (202) 623-7430 Telefax: (202) 623-7201 This compilation of summaries of Working Papers released during July-December 1994 is being issued as a part of the Working Paper series. It is designed to provide the reader with an overview of the research work performed by the staff during the period.

Abstract

Authors of Working Papers are normally staff members of the Fund or consultants, although on occasion outside authors may collaborate with a staff member in writing a paper. The views expressed in the Working Papers or their summaries are, however, those of the authors and should not necessarily be interpreted as representing the views of the Fund. Copies of individual Working Papers and information on subscriptions to the annual series of Working Papers may be obtained from IMF Publication Services, International Monetary Fund, 700 19th Street, Washington, D.C. 20431. Telephone: (202) 623-7430 Telefax: (202) 623-7201 This compilation of summaries of Working Papers released during July-December 1994 is being issued as a part of the Working Paper series. It is designed to provide the reader with an overview of the research work performed by the staff during the period.

Many of the economies in transition have not yet established a comprehensive legal framework for public expenditure management. Such a framework is a necessary basis for building public expenditure management institutions. One option could be to model budget legislation in economies in transition on that of one or several of the OECD countries. The budget legislation of Western industrialized economies, however, was largely developed at a time when compliance with parliamentary appropriation was the main objective--and relatively few countries have revised their budget legislation to deal with the concerns of modern economies regarding macroeconomic management and efficient use of resources. Many aspects of budget legislation in these countries are, of course, relevant to economies in transition. It is argued, however, that these economies need a legal framework that covers all of the issues of fiscal management more explicitly than the framework of most industrialized countries--primarily because economies in transition lack an institutional structure that can effectively use administrative measures to deal with the macroeconomic and efficiency aspects of fiscal management.

This paper discusses principles of public expenditure management in relation to budget legislation, reviews budget legislation in a selected group of industrialized countries, and recommends elements to be included in the budget legislation of economies in transition. The paper places particular emphasis on three points. First, comprehensive coverage of the financial operations of general government--in particular, budget legislation--should encompass key aspects of the operation of so-called extrabudgetary funds. Second, the management role of the ministry of finance--or other relevant agency--should be explicitly stated, particularly in relation to public borrowing, cash management, and execution of the budget. Third, the budget should be presented in a macroeconomic framework, and explicit upper limits for the deficit and bank financing of the government deficit should be stated in the annual budget law.

Working Paper Summaries (WP/94/77 - WP/94/147)
Author: International Monetary Fund