Fiscal discipline law: sound regulation, but implementation should be improved 1 June 2016
Today the Fiscal discipline council in cooperation with the Representation of the European Commission in Latvia are organising an international conference The Fiscal discipline law: The first three years and future prospects. The purpose of this conference is to improve public understanding of budget discipline by organising a public discussion among professionals before the Government commences work on the 2017 state budget.
“The Fiscal discipline law (FDL) contains several good principles that foresee a sustainable budget, solidarity between generations and interest groups, and savings during good times. Pursuant to the FDL, the Council was established, and it monitors whether the law is being followed, and we can conclude that fiscal rules have generally been observed. However, insurance against fiscal risks in the form of a fiscal security reserve in the minimal amount of 0.1% of GDP has yet to be implemented. In addition, a discussion is necessary on a safety reserve for unplanned corrections during the execution of the budget, which cannot be offset by funds for unforeseen events. The agreement between the Council and the Ministry of Finance regarding the independent assessment of macroeconomic forecasts is a positive development, even though this is not specified in the FDL”, says Chairman of the Council Jānis Platais opening the conference. “The recent public opinion survey confirms that the population of Latvia supports the principles of counter-cyclical fiscal policy. People generally support the practice of saving during times of economic growth and treat public debt responsibly, justifying its increase only when the positive effect will be felt by future generations.”
Head of the Representation of the European Commission in Latvia, professor Inna Šteinbuka stresses: “Fiscal discipline is like starting a diet or taking up a sport – the ability to do it every day is just as important as the commitment to start doing it. Currently, Latvia is among the best at fiscal discipline in the European Union. In view of the fact that Latvia’s budget precludes it from adequately financing the health care sector, the European Commission has allowed a budget deficit increase. The goal – to make health care more accessible to the people of Latvia. However, it is important not to waste these resources and invest them in improving the system. Only such an approach will ensure that the health care system itself does not turn into an eternal patient”.
The live stream and conference materials are available at: http://fiscalcouncil.lv/conference-on-fiscal-discipline