Conference Agenda

This study examines the impact of organizational capacity on a country's budget credibility, using Pakistan's budgeting practices as a case study. We find that budget credibility is influenced by three main components of organizational capacity: lack of strategic and budgetary discipline, deficiencies in human resources, and inadequate technological advancement. The research employs an exploratory approach involving analysis of budget and policy documents, key informant interviews with government officials and consultants; and on site observation of budgetary discussions by mid-ranking government officials. Our findings reveal that all three components significantly affect budget credibility. The absence of a strategic phase in the budgeting cycle, dual budgeting practices, unreliable forecasting, violations of accounting principles, and poor coordination highlight the lack of strategic and budgetary discipline. Deficiencies in human resources are reflected in skill gaps, the employment of non-specialized staff, and managerial shortcomings. Additionally, technological issues such as manual data handling, duplication of tasks, and lack of system integration are found to hinder budget credibility.

The fiscal and budgetary rules and policies of recent decades have significantly increased budget deficits and public debt levels worldwide (IMF 2024, 2025). Given this evidence, studies highlight the importance of fiscal sustainability in enhancing governments’ capacity to respond to future crises and build financial reserves that strengthen resilience against uncertainties and complex challenges.

However, different budgetary contexts and environments (e.g., political, cultural, and economic) justify diverse policy approaches. These approaches shape public expenditure efficiency, effectiveness, and economy while driving state reform movements to achieve balanced budgets or surpluses and ensure long-term financial sustainability.

This study analyses the impact of supranational budgetary rules designed to limit or eliminate budget deficits and sovereign debt levels. Specifically, we compare the effects of these rules in two groups of countries: (i) European Union (EU) Member States and (ii) non-EU members of the Organisation for Economic Co-operation and Development (OECD). The analysis covers four key periods: (1) the five years preceding the sovereign debt crisis (2002–2006), (2) the sovereign debt crisis period (2007–2011), (3) the five years following the crisis (2011–2015), and (4) the years in which the European Commission activated the general escape clause of the Stability and Growth Pact in response to the COVID-19 pandemic (2020–2024).

Our findings indicate that while domestic political processes shape national fiscal policies, they are also significantly influenced by the overarching rules established by supranational organisations. The first group of countries is bound by the EU’s Economic and Monetary Union (EMU) fiscal discipline. In contrast, non-EU OECD members follow only the general recommendations provided by the OECD. Furthermore, we assess the extent to which these supranational fiscal measures impacted the fiscal performance of each group.

To examine differences in fiscal behaviour between the two groups, we separately analyse the evolution of budget deficits and public debt levels over the selected periods. The qualitative analysis builds upon existing literature on public budget sustainability in the EU and OECD. In contrast, the quantitative analysis employs performance data from the 27 EU Member States, focusing on two key indicators: general government gross debt (public debt) and general government deficit/surplus (public deficit/surplus). Data are sourced from the International Monetary Fund (IMF), recognised for its quality and international comparability, for both gross general government debt (% of GDP) and net primary fiscal balance (% of GDP) for the period 2002–2023 https://data.imf.org/en/Datasets#t=coveo117bcfc4&sort=%40idata_publication_date %20descending). Missing values in the time series were estimated using trend-adjusted methods based on available data points. To analyze the data, we apply univariate descriptive statistical methods, including mean calculations, as well as econometric methods—particularly the Difference-in-Differences (DiD) method using doubly robust estimation. This approach allows us to isolate the causal effects of supranational budgetary policies on fiscal performance across different political and economic environments.

Refusal of a budget by the Parliament may lead to a government shutdown and thus have damaging effects on the functioning of the State. Yet, there have been several occurrences of budget refusal. In 2024 for example, the French budget was refused by the legislative, who called a motion of no confidence that led to the immediate resignation of the Prime Minister Michel Barnier and France to function without a budget for the year 2025. Budget process is not limited to simply allocating available resources: it also aims to influence them according to strategic objectives. As such, the budgetary process can quickly become a complex and sometimes contentious exercise. For a budget to pass, it usually requires a simple majority from legislative power, or a supermajority in some states. Even when a budget is accepted by the required majority, there are nonetheless always some parliamentarians who refuse the budget, thus accepting the risk of the State functioning without a budget. As such, it is pertinent to study not only the more extreme case of government shutdowns, but the overall rate of approval of a budget by the parliament.

The present paper analyzes the factors influencing the annual vote on cantonal budgets in Switzerland, drawing on a database of parliamentary minutes and cantonal archives covering the twenty-six Swiss cantons between 1980 and 2024. Through a fixed-effects regression and a fractional logit analysis, political, financial, institutional, and socio-demographic determinants of budget acceptance rates are examined.

All twenty-six Swiss cantons follow the common budget procedure in place internationally. A first budget project is elaborated by the executive power and then debated in parliamentary sessions. The parliamentarians amend the initial budget project, until they reach a final budget proposal. The final proposal must be approved by the (simple or super-) majority of the legislative, usually before the end of year t-1 for the budget of year t. Cantons spend more than the federal level in Switzerland. Moreover, due to Swiss strong federalist characteristics, cantons have a high autonomy in their budget process and overall financial management. These elements make them an appropriate level of analysis. Existing literature on budget process has focused more on the negative causes of budget refusal, but the literature on the determinants of budget refusal remains scarce. This study aims to fill this gap, highlighting policy implications that are likely to extend beyond the Swiss context.

We expect the results to show that a higher proportion of right-wing parties in parliament reduces budget acceptance, while cantons with a large urban population have higher acceptance rates. We also hypothesize that more fragmented parliaments, as measured by the rate of extreme-left and extreme-right parties composing the legislative, as well as more stringent debt brake rules in place, complexify the budgetary debate, thus leading to a lower acceptance rate. Finally, past lack of fiscal discipline as well as higher levels of debt should also lead to lower acceptance rates.