Ten Swedish Lessons for India’s Budget Consolidation Program

I had earlier pointed out to a paper on how Indian policymakers should approach Budgetary Reforms.

I came across another excellent paper from Jens Henriksson. He saw the Sweden’s Budget Restructuring program pretty closely. He offers ten invaluable lessons for all policymakers attempting to reform budgets.

  1. Sound public finances are a prerequisite for growth
  2. If you are in debt, you are not free
  3. The one responsible must her or his job on the line
  4. Set goals and stick to them
  5. Consolidation shpuld be designed as a package
  6. Act structurally but be consistent
  7. Do not leave the problems to local authorities
  8. Be honest to citizens and financial markets
  9. Stick to one message
  10. Stick to it

In the author’s words:

If I were to sum up the lessons I have learned it would be the following: The two first lessons were about why I think it is important to get your public finances in order. Lesson three and four was on different ways on how to signal commitment, that you really intend to do something about the deficit. Lesson five, six and seven were on the nuts and bolts of a consolidation programme. Lesson eight and nine was on how to communicate while the programme is running. And the tenth and final lesson was how to avoid getting back in trouble.

All the lessons have excellent anecdotes and valuable insights to think about budget reform.

By the way why Sweden? Sweden faced a huge debt problem after the crisis in 1992.


In its Economic Outlook of December 1994 the OECD projected that the Swedish public debt would explode. By the year 2000 the public debt was expected to hit a record 128 percent of GDP debt for 2000. Today we know that the gross turned out to be less than half that figure at 53 percent. And within a few years the budget deficit, from a high of over 11 percent of GDP, turned into a large surplus.


But getting there was not an easy task. During the consolidation of public finances, I had the opportunity to work in close contact with different ministers of finance in Sweden. This paper relates what this experience taught me about the political economics of budget consolidation.


 It is not a paper about how to get rid of the welfare state. On the contrary, it is about how to strengthen the economic foundations for whatever kind of social model that is preferred. The budget consolidation in Sweden was dramatic but it preserved, and in many ways modernised and improved, the welfare system.

The emphasis is on transparency and stuicking to the plans. This was also the lesson Swedish policymakers learnt (and tried to teach) during the 1992 Banking crisis as well..

A wonderful read.

5 Responses to “Ten Swedish Lessons for India’s Budget Consolidation Program”

  1. Ten Swedish Lessons for India’s Budget Consolidation Program « acc3ss.info Says:

    […] View original post here: Ten Swedish Lessons for India’s Budget Consolidation Program […]

  2. A Balance Sheet crisis in India?? « Mostly Economics Says:

    […] dependent on how well we manage the budget consolidation process. It is time we take the Swedish lessons (or others) a bit too seriously.  Possibly related posts: (automatically generated)History of […]

  3. Rising Government debts are unsustainable but are desirable « Mostly Economics Says:

    […] country experiences I have read (see this, this) of managing govt debts, it is a big big battle. It has other linking problems of high inflation, […]

  4. Where did Obama’s Bank Tax/Fee plan come from…from Sweden « Mostly Economics Says:

    […] valauable lessons to solve a financial crisis, its central bank keeps coming out with new ideas, fiscal consolidation and now this proposal to solve future financial crisis. All from the Swede […]

  5. Fiscal consolidation lessons from Sweden « Mostly Economics Says:

    […] consolidation lessons from Sweden By Amol Agrawal Though I had pointed to the lessons via this excellent paper from Jens Henriksson. But still there is always room for […]

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