Revenue Forecasting

Abstract

Revenue forecasting is key to successful budgeting in the public sector. Just as demand analysis and forecasting in the private sector is of critical importance because sales sustain the financial health of business, adequate and predictable tax and non-tax revenues underpin the financial sustainability and stability of government. The importance of revenue forecasting in public budgeting has increased with governments shifting from annual cash-based budgets to mediumterm budgeting as fiscal policy design and implementation have paid more attention to medium-term constraints and the importance of budgeting for multiyear financial commitments (e.g., to subnational governments in the context of fiscal decentralization and to private sector partners for infrastructure development and public service delivery) has been increasingly recognized. Added emphasis on the sophistication of revenue forecasting has also come from governments moving to account for tax expenditures and to budget for them over the medium term.