Arcticle’s by Beatriz Garcia Osma

Consolidation rules can distort the quality of information in national accounts. These rules may enable elected officials to strategically intervene in independently managed municipal enterprises in pursuit of zero-deficit budget targets at the local level. Consolidation rules in national accounts are designed to enhance oversight when public resources are allocated to local government-owned enterprises to ensure consistent delivery of essential public services. However, our analysis reveals that these same rules can also accommodate actions that distort the quality of information reported in national accounts. Specifically, we refer to cases when compliance with a zero-deficit target may not necessarily indicate an…