Rule-Based Budgeting: The Road to Budget Stability1. The Hungarian Solution

Abstract

Starting from the macro-economic processes of public finance, this article examines the road to reaching financial stability and sustainable economic growth. It outlines the role played by rule-based budgeting in this process. It introduces the regulatory and institutional solutions and explains how, as a logical consequence of being part of a framework, this service can become a useful aspect of financial policy by implementing the respective regulations of the system and of annual budgetary practice. It reaches the conclusion that “elevating” the major stipulations of the rule-based budget framework and the operational rules of the institution safeguarding the implementation into the Fundamental Law of Hungary in 2001 was unavoidable from the aspect of strengthening fiscal responsibility. The article deals with the linkages of the Stability Act, the major characteristics of the work done by the Fiscal Council and the body’s recommendations made in the last few years. Finally, it illustrates with some data the improvement of fiscal (public finance) stability supported by rule-based budgeting.