"There are no obstacles to introducing a tighter and more transparent budgeting framework sooner than planned, the government found at a five-party roundtable meeting, State Secretary Miklós Tátrai said at Finance Ministry's press conference.The materials published on the ministry's website send a welcome message: Hungary's political parties are ready to exercise self-restraint and conserve funds ahead of the 2010 general elections.
The government aims to introduce a fiscal responsibility framework before the next general elections to curb irresponsible spending by future parliamentary majorities, Tátrai said. Encouraged by a promising five-party conference, the Finance Ministry is to propose an accelerated plan to adopt the new fiscal framework, with the most important regulations coming into effect before the 2009 and 2010 budgets are drafted.
This is an interesting new development, since the previous schedule raised serious doubts regarding its credibility: a proposal for the majority of regulations to take effect only after the elections indicated that the current government is reluctant to rein in its own spending.
In line with the new plans, the Fiscal Responsibility Act is to come into effect on Jan. 1, 2008, simultaneously with the establishment of the Parliament's Budgeting Office (OKH), an organization independent of political parties and the government and subordinated to the Parliament. The new office would not be a decision-making body; instead, its role is to prepare independent forecasts and estimates of the fiscal effect of new bills ahead of a parliamentary vote. Its recommendations would be mandatory for Parliament, unless overridden by a two-third majority vote.
The new schedule enables OKH to analyze the macroeconomic effects of the 2009 budget in the fall of 2008, comment on the government's macro forecasts and inform Parliament of any discrepancies between the two. In the fall of 2009, OKH will look into the 2010 Budget Act to see if the draft is financially sound. As long as the draft is believed to pose a direct threat to the viability of the budget, Parliament will adopt OKH's figures instead.
The key elements of the new framework are the following:
Mandatory offset rule: Parliament cannot pass new legislation with a negative fiscal impact that would tip the balance of government finances.
Debt rule for the central government: The total amount of government debt must remain level to ensure the long-term sustainability of fiscal policy and a gradual and continuous decrease in national debt as a percentage of GDP. This is essentially an extension of the convergence plan.
Limit on local government loans: Limitations on municipal borrowing on a case-by-case basis in proportion to non-current expenses to ensure the long-term sustainability of local fiscal policy.
Mid-term budget policy rule: Once the budget is approved for a given year, the government sets budget funding limits for each chapter, leaving little elbow room for reckless spending."
Source:
Portfolio Online Financial Journal
23.07.2007