Determinants of Expenditure Planned According to the Stabilizing Expenditure Rule. Evidence from Poland
Determinants of Expenditure Planned According to the Stabilizing Expenditure Rule. Evidence from Poland

Summary/Abstract: Theoretical background: The main objective of expenditure rules is to limit expenditure growth to preventexcessive deficits and increases in public debt and to maintain long-term fiscal sustainability. In addition,their application stems from the obligation imposed on EU member states to comply with supranationalrules by the Stability and Growth Pact (SGP). Expenditure rules at the national level complement the SGP(2024) requirements in place in 16 EU countries. A stabilizing expenditure rule (SRW) has been in placein Poland since 2015. Purpose of the article: The purpose of the analysis presented here is to verify the fulfillment of the re-quirements for the SRW. Its implementation consists primarily of identifying the mechanism of action andthe impact of the various determinants highlighted in SRW on the expenditure planned in the draft budgetlaws for 2015–2024.Research methods: Appropriate research methods were used to achieve the objective: analysis of Polishand foreign literature (publications, journals, scientific studies, reports of international institutions) and legalacts (Polish, EU, and selected countries’ norms). In addition, the databases of the European Commissionand the International Monetary Fund on fiscal rules were used. The impact of individual components of theexpenditure fiscal rule on changes in expenditure was assessed using the method of indexed decompositionanalysis. The application of this method makes it possible to determine to what extent the observed changesin expenditure planned according to the SRW between 2015 and 2024 are caused by their determinants. Theempirical analysis is based on data officially published by the Ministry of Finance in Poland.Main findings: Changes in expenditure planned under the SRW for 2015–2024 were, to the greatest extent,due to assumptions on inflation (inflation forecasts or inflation target) and medium-term GDP dynamicsand, to a lesser extent, due to discretionary actions. They were constrained by the correction mechanism forpublic finance imbalances applied in selected years and other methodological changes related to the SRW.The analysis of historical data, parliamentary documents, and the decomposition analysis results indicatethat the SRW meets most of its requirements. However, the numerous changes in the scope of the rule andother changes of methodological nature may raise some doubts as to whether the condition of not beingsubject to sibilant influences is met.

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