Countries have increasingly adopted fiscal rules and fiscal councils to help strengthen their fiscal frameworks, promote debt sustainability and increase the credibility of fiscal policy. Fiscal rules are long-lasting constraints on fiscal policy through numerical limits on broad budget aggregates, while independent fiscal councils have often been tasked to provide fiscal oversight, including monitoring the fiscal rules and assessing credibility of budgets and quality of public policies.
This paper presents an overview of fiscal rules and fiscal councils across the world in the run-up to and during the COVID-19 pandemic. It relies on newly updated global datasets on fiscal rules and fiscal councils during 1985–2021. The evidence illustrates the diverse experiences with rules-based fiscal frameworks and sheds light on the design and operation of fiscal rules and fiscal councils around the world. While advanced economies were frontrunners in adopting fiscal rules, rules are increasingly common among emerging market and developing economies.
The report also examine how features of rules have evolved in terms of their flexibility, enforcement and monitoring. A key trend has been greater flexibility in the rules, including through the escape clauses. The number of fiscal councils has doubled over the last decade. Many of them were established to monitor the new fiscal rules or in response to external pressures after large shocks.