Italy: Budgetary Frameworks and the Net Expenditure Path

At the request of the Ragioniere Generale dello Stato in the Ministry of Economy and Finance, an IMF FAD mission supported Italy to strengthen its budgetary framework and implement the net expenditure path (NEP) under the revised European Union (EU) fiscal framework. Italy has a well-established Public Financial Management (PFM) system and has long operated under conditions of elevated debt and sustained fiscal consolidation. The current challenge is to operationalize the NEP within this context, while maintaining credible consolidation and managing economic uncertainty. The introduction of the NEP should change how fiscal policy is formulated and monitored, shifting the operational focus from targeting the budget balance to managing a binding expenditure path. This requires clearer alignment between fiscal strategy, medium-term projections, and annual budget decisions. The mission recommends improving the operational use of the NEP and anchoring the budget process in a more strategic, top-down approach.