Fiscal Rules and Fiscal Councils

This paper examines the evolving landscape of fiscal rules and fiscal councils worldwide, focusing on developments since the pandemic. Drawing on the latest updates to the IMF’s Fiscal Rules and Fiscal Councils databases—which cover more than 120 economies and 54 fiscal councils—it documents the increasing adoption of fiscal rules, particularly in emerging markets and developing economies. The analysis highlights improvements in the legal foundations and flexibility of fiscal rules, along with a growing role for effective fiscal councils in providing oversight. Despite these advancements, compliance remains uneven, with widespread and persistent deviations from deficit and debt rule limits. The paper introduces new indices to quantify the overall strength of fiscal rules and the institutional quality of fiscal councils, revealing significant cross-country variation and a positive correlation between the strength of rules and fiscal discipline.