The Swedish experience in reducing budget deficits and debt

By 1994, Sweden had a budget deficit of 10 percent of GDP, highest among OECD countries. Its public debt had doubled in three years. Such high debt levels were threatening Sweden's economic stability and making it increasingly vulnerable to disruptive global capital market flows. The new government that took office in late 1994 put in place an aggressive fiscal consolidation program aimed at reducing the deficit significantly by 1997 and balancing the budget by 1998.> Sweden's finance minister Persson discusses his country's recent efforts to reduce its budget deficit. In overview remarks made at the bank's 1995 symposium, \\"Reducing Budget Deficits and Debt: Issues and Options,\\" Persson identified three elements that are required for a fiscal consolidation to be successful. First, the program must be designed so that the burdens are shared equitably. Otherwise, public support, which is absolutely essential, will be lacking. Second, and related, the consolidation program must be comprehensive, rather than a collection of ad hoc measures, making it clear to interest groups that everyone will be asked to make sacrifices. And third, the reform process and budgeting procedures should be as transparent as possible. Only in this way can credibility be established and maintained.