Fiscal Rules and Medium-Term Fiscal Frameworks in Latin America and the Caribbean: Managing New Challenges

The paper analyzes how fiscal institutions in Latin America and the Caribbean (LAC) can improve fiscal credibility, debt management, and public investment outcomes. It finds that while fiscal rules and medium-term fiscal frameworks (MTFFs) are widespread, their effectiveness depends on credibility, consistent implementation, and integration into budgeting and accountability systems. Weaknesses—such as frequent target revisions or unclear escape clauses—undermine their impact. Empirical evidence shows that stronger fiscal frameworks lead to more accurate forecasts, fewer debt shocks, and better protection of growth-enhancing spending during fiscal tightening. Market perceptions also depend more on credibility and transparency than on the mere existence of fiscal rules. The paper concludes that future reforms should focus on making existing frameworks more effective, integrated, and operational in practice.