How do you ensure sustainability in public finance?

Public finance is the branch of economics that deals with the revenues and expenditures of the government and its impact on the economy. It involves managing the balance between public spending and taxation, as well as ensuring the long-term fiscal sustainability of the public sector. How do you ensure sustainability in public finance? Here are some key aspects to consider.

Key takeaways from this article

Adopt clear fiscal rules:

Set numerical limits on budget balances and debt levels. These constraints help prevent excessive spending, ensuring long-term fiscal health and stability.### *Engage stakeholders inclusively:Involve taxpayers, creditors, and civil society in fiscal decisions. This fosters transparency, enhances policy acceptance, and ensures sustainable public finance practices.

This summary is powered by AI and these experts

1 Define sustainability

Sustainability in public finance means that the government can meet its current and future obligations without jeopardizing its solvency or its ability to provide public goods and services. It also means that the government can maintain a stable and predictable fiscal policy that supports economic growth and social welfare. Sustainability can be measured by various indicators, such as the debt-to-GDP ratio, the primary balance, the fiscal gap, and the intertemporal budget constraint.

Add your perspective

James M. Mulcahy, MA, MBA, CMA, CFM

Economist
Report contribution
The easiest way to ensure sustainability is to minimize the expenditures. The public sector should avoid completely activities for which it has no expertise and let the private sector do them.

Like
Satish Chandra

Founder @ RDSSDF & ASGI | Non-Profit/Public/Organizational Management
Report contribution
Green economy and Circular Economy including the management of Biosphere are critical to public finance in the present scenario. The ESG & STEM including the application of AI & ML would bring new perspectives to planning the fiscal, monetary, budget, and expenditure policies of the Governments.

Like
Arda Bozkurt

Finance Dept. / Aselsan
Report contribution
Sustainability in public finance should be ensured not only by revenue and expenditure management, but also by monitoring and managing efficiency and productivity in public administration.

Like
Darin Gunesekera

Working for improving Society
Report contribution
The base of Sustainable national economics is Fiscal Surplus. Add to this BoP Surplus and there you have it HOW TO ACHIEVE THIS ? Remove the country from International multilateral and bilateral Government participation Banks and Finance Companies and especially Merchant Banking Services. No Government should be allowed these facilities

Like

2 Assess fiscal risks

Fiscal risks are the potential sources of deviation from the expected fiscal outcomes, such as macroeconomic shocks, contingent liabilities, natural disasters, or policy changes. They can have significant implications for the sustainability of public finance, as they can increase the fiscal deficit, the debt burden, or the financing needs of the government. Therefore, it is important to identify, quantify, and monitor the fiscal risks, and to design appropriate mitigation strategies and contingency plans.

Add your perspective

Juan Alberti

Economist | Expert @IMF @IDBG @WBG
Report contribution
In the past two decades, fiscal policy has encountered escalating challenges, with climate change taking center stage as a critical concern. Fiscal risks linked to climate change can be divided into two main categories: "physical risks," which stem from the direct impacts of global warming, and "transition risks," related to the shift toward a low-carbon economy and its associated policies. Assessing both these dimensions separately and jointly is of utmost importance. In scenarios where climate change goes unmitigated, physical risks loom larger. However, as we unite in efforts to combat global warming through emissions reduction measures, transition risks take on increasing significance.

Like

3 Adopt fiscal rules

Fiscal rules are numerical constraints on the fiscal aggregates, such as the budget balance, the debt level, the expenditure growth, or the revenue structure. They aim to enhance the credibility and discipline of the fiscal policy, and to prevent excessive or procyclical fiscal behavior. Fiscal rules can help ensure sustainability in public finance, by limiting the fiscal space for discretionary or opportunistic actions, by creating fiscal buffers for adverse shocks, and by signaling the commitment to fiscal prudence.

Add your perspective

4 Implement fiscal reforms

Fiscal reforms are structural changes in the fiscal institutions, policies, or procedures that aim to improve the efficiency and effectiveness of the public sector. They can involve reforming the tax system, the public expenditure management, the intergovernmental fiscal relations, or the fiscal transparency and accountability. Fiscal reforms can help ensure sustainability in public finance, by increasing the revenue potential, reducing the spending pressures, enhancing the fiscal coordination, or strengthening the fiscal oversight and governance.

Add your perspective

5 Engage with stakeholders

Stakeholders are the individuals or groups that have an interest or influence in the public finance issues, such as the taxpayers, the beneficiaries, the creditors, the media, or the civil society. They can affect or be affected by the fiscal decisions and outcomes, and they can provide valuable inputs or feedback for the fiscal policy design and implementation. Engaging with stakeholders can help ensure sustainability in public finance, by enhancing the legitimacy and acceptability of the fiscal measures, by fostering the participation and ownership of the fiscal goals, and by improving the communication and information sharing.

Add your perspective

6 Evaluate fiscal performance

Fiscal performance is the assessment of the results and impacts of the fiscal policy on the economic and social objectives, such as growth, stability, equity, or efficiency. It involves collecting and analyzing relevant data and indicators, comparing them with the benchmarks or targets, and identifying the strengths and weaknesses of the fiscal policy. Evaluating fiscal performance can help ensure sustainability in public finance, by providing evidence-based feedback and learning, by enabling accountability and responsibility for the fiscal outcomes, and by supporting continuous improvement and innovation.

Add your perspective

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

Add your perspective

How do you ensure sustainability in public finance?

1

2

3

4

5

6

7

1 Define sustainability

2 Assess fiscal risks

3 Adopt fiscal rules

4 Implement fiscal reforms

5 Engage with stakeholders

6 Evaluate fiscal performance

7 Here’s what else to consider

Economics

Rate this article

Thanks for your feedback

More articles on Economics

More relevant reading

How do you ensure sustainability in public finance?

1

2

3

4

5

6

7

1 Define sustainability

2 Assess fiscal risks

3 Adopt fiscal rules

4 Implement fiscal reforms

5 Engage with stakeholders

6 Evaluate fiscal performance

7 Here’s what else to consider

Economics

Rate this article

Thanks for your feedback

Explore Other Skills