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Luc Eyraud, Andrew Hodge, Mr. John Ralyea, and Julien Reynaud

following the end of financial reporting periods and it tends to be incomplete ( OECD 2016 ). Data may not be published on a timely basis for the purpose of monitoring a rule; this gives an operational advantage to subnational debt rules over other types of rules, because debt data is generally available promptly with a monthly frequency. Further, it is more difficult to measure the business cycle at the subnational level, which complicates the use of a cyclically adjusted balance (CAB) rule (see section titled “Making Subnational Rules Flexible”). A fourth

Luc Eyraud, Andrew Hodge, Mr. John Ralyea, and Julien Reynaud
This note discusses how to design subnational fiscal rules, including how to select them and calibrate them. It expands on the guidance provided at the national level on rule selection and calibration in IMF (2018a) and IMF (2018b). Thinking on subnational fiscal rules is still evolving, including their effectiveness (for example, Heinemann, Moessinger, and Yeter 2018; Kotia and Lledó 2016; Foremny 2014), and this note only provides a first analysis based on international experiences and the technical assistance provided by the IMF. Main findings are summarized in Box 1. The note is divided into five sections. The first section defines fiscal rules. The second section discusses the rationale for subnational rules. The third section provides some guidance on how to select the appropriate rule(s) and whether they should differ across individual jurisdictions. The fourth section explores the issue of flexibility by looking at how rules should adjust to shocks. Finally, the last section focuses on the “calibration” of the rules.
International Monetary Fund. Fiscal Affairs Dept.

Million Dollars II.6. Procurement Statistics for Concession Projects of Central Government II.7. Key Dates for the Submission and Approval of the Budget II.8. Evolution of the Fiscal Targets Set Under the CAB Rule II.9. Summary Assessment of Fiscal Forecasting and Budgeting III.1. Selected Reports Related to Fiscal Risks III.2. Maximum Exposure and Potential Impact of Guarantees in Chile, 2020 III.3. Summary of Reporting and Monitoring of Municipal Governments in Chile III.4. Summary Assessment of Fiscal Risks Management and Disclosure ANNEXES I

Klaus Schmidt-Hebbel

Responsibility Law includes two items that require governments to adopt a fiscal policy that is at least in principle consistent with a horizon that exceeds one year: (1) the requirement imposed on new administrations to present their four-year fiscal policy framework and its implications for the cyclically adjusted government balance and (2) the requirement that the MoF submit annually, together with the draft budget law, a medium-term budget projection. Moreover, by adhering to a CAB rule, governments are required to base the next year’s budget proposal on medium

International Monetary Fund. Fiscal Affairs Dept.
Strong fiscal institutions have contributed to Chile’s macroeconomic stability, and recent reform initiatives have focused on enhancing these institutions and fiscal transparency. This report assesses fiscal transparency practices in Chile in relation to the requirements of the IMF’s Fiscal Transparency Code and confirms that many elements of sound fiscal transparency practices are already in place. Chile’s practices meet the principles of the code at a good or advanced level for 21 out of the 36 principles. This is a good score, compared to the average for Latin American Countries and Emerging Market Economies. On a further nine principles, Chile meets the basic standard of practice. Chile’s fiscal transparency practices are very strong for fiscal forecasting and budgeting, followed by fiscal reporting, while fiscal risk analysis and management demonstrate more mixed results. Further improvements could be achieved relatively easily through the publication of some internal analyses or through a more timely or user-friendly publication of already available information.
International Monetary Fund. Fiscal Affairs Dept.

cyclically-adjusted balance (CAB) rule are clear and guide budget processes, there is a robust performance information system, and fiscal reports regularly publish forecast reconciliations for several different budget aggregates. Fiscal risk analysis and management (Pillar III) practice levels are more dispersed than those of other pillars. There are some advanced practices, which are difficult to achieve as scores are generally lower in this pillar given it is a modern PFM area. In Chile, the practices for the management and disclosure of risks stemming from government

International Monetary Fund. Western Hemisphere Dept.

net indebtedness ceiling is met). f. Structural adjustment . A cyclically-adjusted balance (CAB) rule has a great theoretical appeal, as it allows for countercyclical policy (and provides guidance on the fiscal stance). However, such rule does not always yield satisfactory results, mainly because real-time estimates of the output gap are often unreliable, especially in countries experiencing structural changes, and often lead to overestimation of potential output. 12 Moreover, an additional complication for commodity-exporting countries is that an adequate

International Monetary Fund. Western Hemisphere Dept.
Uruguay entered the pandemic with solid institutions and social cohesion but growing macroeconomic imbalances—especially slow economic growth and weak public finances—as the end of the last commodity price boom in 2014 uncovered structural weaknesses. A new government came to power in March 2020 with a mandate to boost growth and restore fiscal sustainability. Legislation setting the foundations for many of the reforms has been passed and implementation is advancing––including on a new fiscal rule, and state-owned enterprise (SOE) and pension reforms.
Mr. Joseph Gold

avoirdupois. This amount was the U.S. dollar equivalent per pound avoirdupois of the number of Poincaré francs per kilogram established as the limit on liability by the Warsaw Convention, to be translated into any national currency. 170 The amount in U.S. dollars was derived from the last par value of the dollar ($42.22 per ounce of fine gold) established under the Articles before the Second Amendment. The Poincaré franc is defined as the equivalent of 65½ milligrams of gold nine-tenths fine. The Federal Aviation Act of 1958 171 conferred on the CAB rule