Jón Blöndal, Head of Budgeting and Public Expenditures OECD - IFAC Sovereign Debt Seminar

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Jón Blöndal, Head of Budgeting and Public Expenditures OECD - IFAC Sovereign Debt Seminar

Jón Blöndal, Head of Budgeting and Public Expenditures OECD - IFAC Sovereign Debt Seminar

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  • 1. Fiscal Sustainability Jón Ragnar Blöndal Head, Budgeting and Public ExpendituresOrganization for Economic Cooperation and Development International Federation of Accountants Seminar Vienna, 20 March 2012
  • 2. Agenda• The crisis as a catalyst for structural reform – OECD’s Going for Growth Study• The crisis as a catalyst for reform of budget institutions – The OECD’s Senior Budget Officials• The limits of accruals for fiscal sustainability purposes – The OECD’s Annual Accruals Symposium 1
  • 3. The crisis has acted as a catalyst for reforms…Responsiveness to Going for Growth recommendations across the OECD, 2005-11 2005-07 2008-09 2010-11 Responsiveness rate 0.45 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00 Labour utilisation Labour productivity Overall Figure 1.2 of Going for Growth 2012 2
  • 4. …with a clear acceleration in the past two years…Change in overall responsiveness to Going for Growth recommendations across OECD countries from 2008-09 to 2010-11 Percentage points 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 -0.1 -0.2 -0.3 Figure 1.3, Panel B. of Going for Growth 2012 3
  • 5. …as the need for medium-term fiscal consolidation became more pressingOverall responsiveness to Going for Growth priorities and fiscal consolidation effort Responsiveness rate, 2010-2011 1.0 GRC 0.9 0.8 ESP 0.7 IRL PRT NZL AUT POL 0.6 SWE GBR HUN 0.5 FIN DNK KOR CZE ITA 0.4 USA AUS JPN FRA 0.3 CAN CHE NLD 0.2 NOR BEL Correlation coefficient: 0.57 0.1 LUX DEU ISL Statistically significant at the 1% confidence level 0.0 -4 -2 0 Variation in the underlying primary balance as a 8 2 4 6 percentage of 10 potential GDP12 from 2010 to 2012 4 Figure 1.5, Panel B of Going for Growth 2012
  • 6. Agenda• The crisis as a catalyst for structural reform – OECD’s Going for Growth Study• The crisis as a catalyst for reform of budget institutions – The OECD’s Senior Budget Officials• The limits of accruals for fiscal sustainability purposes – The OECD’s Annual Accruals Symposium 5
  • 7. The crisis as a catalyst forreform of budget institutions (1)• The great lesson from the countries that experienced fiscal crises in the 1990’s: Budget institutions matter• Many of the reforms today are aimed at better implementation of and building on previous reforms – Parliamentary budget offices & fiscal councils are the clear innovation 6
  • 8. The crisis as a catalyst forreform of budget institutions (2)• Fiscal rules – Design choices• Medium-term expenditure frameworks – Better integration with annual budget process• Top-down budgeting – An (even) greater role for finance ministries ?• Budget transparency – Long-term reports• Independent fiscal institutions – Parliamentary budget offices & fiscal councils 7
  • 9. Agenda• The crisis as a catalyst for structural reform – OECD’s Going for Growth Study• The crisis as a catalyst for reform of budget institutions – The OECD’s Senior Budget Officials• The limits of accruals for fiscal sustainability purposes – The OECD’s Annual Accruals Symposium 8
  • 10. The limits of accruals for fiscal sustainability purposes• Accruals is an immensely important managerial tool – Role of accruals in reforming civil service pension plans – And public sector pay-setting• But is not well suited for long-term fiscal analysis – Recognition criteria (taxes, social security) – Long-term cash flow analysis is the way forward as recognized by IPSASB 9
  • 11. To recap• The crisis as a catalyst for structural reform• The crisis as a catalyst for reform of budget institutions• The limits of accruals for fiscal sustainability purposes 10
  • 12. For further information • OECD Journal on Budgeting • www.oecd.org/gov/budget • Jon.BLONDAL@oecd.org 11