Ireland’s Fiscal Framework: Options for the Future
The Fiscal Responsibility Act of 2012 established fiscal policy rules and an independent fiscal watchdog, the Irish Fiscal Advisory Council (IFAC) – patterned after the new EU template for fiscal rules and the Swedish fiscal council, respectively. These elements, along with budgetary procedural rules, comprise the core of Ireland’s fiscal framework. Although the present framework meets most criteria of international good practice, there is considerable scope for improvement to meet Ireland’s future needs, especially for restoring public debt sustainability – as it is no longer under the direct tutelage and protection of the EU and IMF. To this end, the paper outlines a set of options to strengthen the fiscal framework consisting, among others, of (a) a binding public debt rule; (b) an indicative structural budget balance rule; (c) a pay-go rule, and (d) steps to broaden the mandate and amplify the resources of IFAC. It is argued that these options should help pave the way to further gains in credibility in financial markets, and ultimately, to higher economic growth and stability.
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