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Interim Budgets Navigating Government Transition

In the realm of government transitions, interim budgets serve as a crucial tool for maintaining stability and continuity during periods of change. An ‘interim budget’ is one of the tools that countries are using where it is not practical for the government to present a full budget in its last year in office when general elections are due before or after the start of a fiscal year.

Interim budgets are essentially stopgap measures designed to manage essential spendings and day-to-day expenses, such as salaries and ongoing programs, until a new government can formulate and present a comprehensive budget aligned with its priorities. The moral imperative behind interim budgets stems from the principle that it would be inappropriate and unethical for an outgoing government to determine fiscal policies and limit the policy scope for the incoming government.

During the transition period, an interim budget operates on the basis of existing policies, aiming to sustain service delivery and governmental operations without introducing significant policy changes or long-term initiatives. Typically, it includes appropriations based on the previous year's budget allocations, adjusted for inflation or other relevant factors, to ensure the government's continued functioning.  It limits expenditures to those deemed essential for the government's proper functioning until the adoption of a regular budget by the legislature.

The duration of an interim budget varies depending on the country's legal and political frameworks but generally covers the initial months of the fiscal year until the new government can introduce a full budget. Once the new administration assumes office, it becomes responsible for presenting a comprehensive budget for the remainder of the financial year, outlining its policy priorities, revenue projections, and expenditure allocations.

It is important to note that interim budgets are temporary measures and become invalid once the regular budget is approved by the legislature. Expenditures or contracts authorized under the interim budget are treated as part of the regular annual budget, emphasizing the transitional nature of interim budgetary arrangements.

Several countries use an interim budget to ensure that a government’s pre-determined functions can continue for the transition period in an election year. For instance, interim budgets in India have been a regular feature in election years (e.g., 2019, 2014, 2009, 2004). They were necessitated because the general elections have been usually held around April-May, whereas the budgets are presented in February.  In Japan, the Public Finance Act allows the Cabinet to prepare a “provisional budget” to cover a specified portion of the fiscal year when the government expects that the regular budget cannot be approved before the new budget year (by 1 April), for reasons such as an upcoming general election[1]. The provisional budget is replaced by the regular budget for the remainder of the fiscal year once the latter is approved by the National Diet (Japan's parliament).


There are several good practices to follow when preparing an interim budget, including:

Preparing an interim budget is a critical task for governments during times of transition whether due to elections or other circumstances. By adhering to these principles, interim budgets can play an important role in facilitating smooth government transitions, providing a framework for financial management and continuity during periods of change.

Interim budgets also apply when the parliaments refuse to adopt the executive’s proposal budget before the start of a new fiscal year. For this, different rules and principles apply.



[1] This situation may arise due to various reasons, such as political gridlock or delays in budget negotiations, or upcoming events like general elections.