A Balancing Act: Reform Options for Paraguay’s Fiscal Responsibility Law

November 16, 2016

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Antonio David, and Natalija Novta. A Balancing Act: Reform Options for Paraguay’s Fiscal Responsibility Law, (USA: International Monetary Fund, 2016) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Paraguay faces a trade-off between building fiscal credibility and amending the existing fiscal rule to accommodate infrastructure investment and provide space for countercyclical policies. In this paper, we discuss several alternative fiscal rules for Paraguay and present simulations of debt trajectories in each case, assuming a baseline and three deterministic shock scenarios. We provide a supplementary Excel file to replicate debt simulations under different fiscal rules. The results suggest that potential modifications to make the fiscal rules more flexible in Paraguay should be accompanied by a number of safeguards that enhance credibility of the fiscal anchor and preserve sustainability.

Subject: Capital spending, Current spending, Expenditure, Fiscal policy, Fiscal rules, PFM legal and regulatory frameworks, Public financial management (PFM)

Keywords: Balance rule, Capital expenditure, Capital spending, Ceiling rule, Current spending, Deficit, Deficit ceiling, Deficit rule, Expenditure rule, Fiscal Governance, Fiscal Rules, Paraguay, PFM legal and regulatory frameworks, Rule, WP

Publication Details

Pages:

33
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2016/226
Stock No:

WPIEA2016226
ISBN:

9781475555158
ISSN:

1018-5941

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