Promoting Fiscal Discipline by International Monetary Fund

Author:International Monetary Fund
Language: eng
Format: epub
ISBN: 9781452729152
Publisher: International Monetary Fund
Published: 2010-08-15T00:00:00+00:00

Sanctions

Some FRLs contain well-defined sanctions for noncompliance; others rely only on reputation as a commitment device. There are two broad types of sanctions: (1) “institutional,” applying to the noncomplying jurisdiction (e.g., witholding of transfers, credit restrictions, and fines); and (2) “personal,” applying to the responsible official (e.g., fines, dismissal, and penal prosecution). For example, the FRL in Brazil specifies comprehensive institutional sanctions and is complemented by the Fiscal Crimes Law, which outlines stringent personal sanctions that can escalate up to penal prosecution. The FRLs in Colombia and Ecuador also contain both types of sanctions, while the FRLs in Peru and Argentina only rely on institutional sanctions.15 Spain’s FRL does not specify sanctions per se, but if the general government deficit were to exceed 3 percent of GDP, leading to the application of European Union (EU) sanctions, noncomplying jurisdictions would be required to contribute to the payment of fines in proportion to their contribution to the overall deficit. Other FRLs rely solely on reputational sanctions (e.g., India and Panama). While the FRLs in Australia and New Zealand do not specify sanctions either, they clearly define accountability of different actors engaged in fiscal policy.

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