Sunday, January 25, 2009

The latest edition to Fiscal Responsibility Laws

The Fiscal Responsibility Law adopted by parliament on November 17 provides a domestic anchor for fiscal policy and is in line with the program. The law introduces numerical and procedural rules for the preparation of annual budgets, including the obligation to achieve a decline in public debt in real terms, the prohibition of primary deficits, compliance with medium-term expenditure ceilings, and the requirement to offset the impact of legislative initiatives on the budget balance. During a transitory period, which applies to the preparation of budgets for 2010-12, the projected growth of real expenditure cannot exceed half the projected growth of real GDP. The law also establishes a fiscal council, consisting of three wise persons and a secretariat. The council, which should be operational by the end of 2009, will prepare macroeconomic forecasts and projections of budgetary aggregates; it will also assess the budgetary impact of draft legislation (scoring) and make recommendations on corrective actions when needed. Finally, the council will have an advisory role, providing information and assessments to all branches of government upon request. The authorities and staff agreed on the importance of implementing medium-term budget preparation and planning, and of providing the fiscal council and its secretariat with a budget appropriation commensurate to its mandate

-Hungary - Stand-By Arrangement - Interim Review Under the Emergency Financing Mechanism

The outlines of the Fiscal Responsibility Act
The Fiscal Council

- prepares macro-economic forecasts;

- prepares baseline projections for the budget figures;

- prepares methodological recommendations relating to fiscal planning, forecasting and impact assessment;

- prepares estimates, both following submission to Parliament and before the final vote, concerning the fiscal effects of the budget bills and supplementary budget bills as well as any other bills discussed by Parliament that may have an impact on the development of mandatory items;

- may prepare estimates concerning the budgetary impacts of draft bills other than those indicated above, as well as of motions for amendment submitted in the first or second phase of the Parliamentary debate or before the final vote which are subject to parliamentary decision;

- provides information, upon request, to the President of the Republic, the parliamentary commissioners, the president of the State Audit Office, the governor of the National Bank of Hungary and the committees of Parliament concerning issues within their competence;

- informs the budget committee of Parliament or the Government about its legislative recommendations to promote the maintenance of fiscal discipline and the transparency of public finances;

- comments on draft legislation relating to fiscal accounting rules.

Budget Simulation Model and its explanation

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