Question

Please I need today answer for This question and it is very important and I need solution for this issue with all the details , and help me with all the details.Please write your answer to me by typing, not by handwriting, so that I can read and understand your answer clearly.

This is an essay question . Write no more than 2 pages (maximum). Only legible answers will be considered.

Question. State two features of the Swedish Fiscal framework and explain what they entail.

Answer 1

Swedish Fiscal Framework:

The fiscal policy framework consists of a number of targets and principles that are mainly intended to ensure the long-term sustainability and transparency of fiscal policy. Some parts of the framework are regulated by legislation, while others are a result of the practice that has evolved since the crisis in central government finances in the early 1990s. The fiscal policy framework includes a surplus target for general government net lending. The surplus target is supported by a debt anchor for the general government consolidated gross debt, the “Maastricht debt”. The framework also includes an expenditure ceiling for central government expenditure (excluding interest on the central government debt) and expenditure in the old age pension system, as well as a local government balanced budget requirement. The budgetary policy targets, i.e. the surplus target, the debt anchor, the expenditure ceiling and the local government balanced budget requirement make up the central parts of the fiscal policy framework along with a stringent central government budget process, external monitoring and transparency.

The fiscal policy framework consists of several targets and principles for fiscal policy, and methods to monitor and evaluate these and ensure transparency. The framework consists of the following elements:

• Budget policy targets (surplus target, debt anchor, expenditure ceiling, balanced local government budgets),
• a disciplined central government budget process,
• external monitoring of fiscal policy, and
• openness and clarity.

Features of Swedish Fiscal Framework:

1. Surplus target :

The Budget Act (2011:203) requires the Government to propose a target for general government net lending (surplus target). The Riksdag (Swedish Parliament) has determined that as of 2019 the level of the surplus target will be an average of 0.33 per cent of GDP over an economic cycle. A comparison of general government net lending with the surplus target is used to assess the size of any fiscal space available from a forward-looking perspective or the need for measures to reinforce the budget. Since the economic situation affects net lending, this comparison is made on the basis of an estimate of the structural balance. A backward-looking eightyear average of actual net lending is used to evaluate ex post whether the surplus target has been achieved. There is a deviation from the surplus target if the structural balance in the present or next year deviates clearly from the target level. When a target deviation is established, the Government has to give an account of how a return will be made to the target. The plan for returning to the target has to be timed and to normally start in the next budget year. When the economy is in balance, a target deviation should, in principle, decrease at the same rate as is normal in the absence of active political decisions. However, resource utilisation should also be taken into account. A surplus target, once adopted, remains in place, but should be reviewed in every second electoral term. The conclusions of the review should be widely agreed among the parties in the Riksdag in order to safeguard the stability and credibility of the framework. A new surplus target should enter into force in the first year after an ordinary election. The review should take account of the development of the debt in relation to the debt anchor.

2.Expenditure ceiling :

Following a proposal by the Government in the Budget Bill, the Riksdag sets an expenditure ceiling for the third year ahead, i.e. the second year after the budget year. The expenditure ceiling creates conditions for achieving the surplus target. The level of the expenditure ceiling should promote a desirable long-term development of central government expenditure. Along with the surplus target, the expenditure ceiling governs the level of the total tax take and helps to prevent a development in which the tax take must be increased gradually on account of insufficient control of expenditure. The expenditure ceiling must not be circumvented by budgeting and reporting benefits, normally financed by appropriations, under income headings. A further main principle is that expenditure has to be reported in the year when it is intended to be used. Justifications have to be given for any departures from these principles. The practice is to have a ‘budgeting margin’ of a certain size under the expenditure ceiling. This margin is primarily intended to act as a buffer if expenditure does not grow as expected on account of the development of the economy.

That is a Detailed short note on Swedish Fiscal Framework and its features.