Belgium—2006 Article IV Consultation
Preliminary Conclusions
Brussels, November 13, 2006

Successful consolidation will involve efforts at all levels of government and a revision of fiscal federalism arrangements. For now, emerging imbalances have been successfully managed through unplanned adjustments to budget targets of regional entities, but these imbalances are set to widen. The federal government and social security together (Entity I) are facing a decline in their relative share of revenues, while spending pressures are intensifying. At the same time, the sub-federal governments (Entity II) have little incentive to save the increase in revenues they are experiencing. In revising the arrangements, it will be important that any further devolution be accompanied by strengthened accountability and stronger coordination among federal and sub-federal entities of both budgetary and other economic policies.

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