Public finances in OECD countries are facing significant challenges such as slow economic growth, ageing populations, high debt from recent crises, and new spending pressures, including in defence. This report provides an overview of countries’ savings initiatives implemented in 2025-2026. While savings measures are widespread, they appear modest relative to the challenges public finances are facing. Going forward, enhancing public understanding of the fiscal challenges ahead will be essential.
Restoring Public Finances
Enabling Effective Government
Introduction
Key figures
About 1/2
of OECD countries are projected to worsen their primary deficit during 2023-2027
89%
of OECD countries are taking savings measures in 2025-2026 in social protection and/or healthcare
77%
of OECD countries are taking savings measures in 2025-2026 in government operations
Public finances in many OECD countries are under significant pressure
Persistent budget deficits, extensive support to households and businesses during recent crises, and sluggish economic growth have contributed to an increase in public debt to around 110% of GDP. Ageing populations will continue to create pressure for more expenditure on healthcare and pensions. Other areas, including defence, also face pressure for more spending.
Consolidation efforts appear modest in comparison to spending challenges
Efforts to achieve savings in public spending appear modest in comparison to the spending challenges at hand. Overall, the OECD projects that the primary budget balance will worsen in nearly half of Member countries during 2023-2027. Where data are available, OECD countries’ own estimates also suggest that only modest consolidation will be gained through discretionary measures introduced in 2025-2026 to save on expenditures. Revenue increases are also widely used to support consolidation efforts in many countries.
Savings are most often pursued in the areas with the largest spending
Around half of public spending in OECD countries is on social protection (pensions and benefits) and health. These are the areas in which savings measures are being focused, with almost all OECD countries introducing measures in 2025-2026 in social protection, including pensions, unemployment, disability and family benefits, and/or in health.
There are significant efforts to make government operations more efficient
Most OECD countries are seeking to achieve savings by making government operations run more efficiently. This includes using digital and AI tools to automate processes and deliver more efficiently, restructuring or merging government institutions, and building shared cross-government services for functions such as procurement and HR. More than half of OECD countries are also undertaking public employment reforms to reduce the cost of the public workforce, including by restraining pay and benefits.
What can governments do?
Well-designed and well-managed budget institutions have a strong and consequential impact on fiscal outcomes. Medium-term and top-down budgeting frameworks are key to managing expenditures and achieving fiscal objectives. Spending reviews are also fundamental in considering all existing spending when seeking savings and funding reallocation.
With public finances under severe pressure, governments face difficult choices. To build support for reforms, public ownership of fiscal challenges is key. Governments can contribute by demystifying the budget, engaging with citizens, and communicating public finance issues clearly. Independent fiscal institutions can help by championing fiscal sustainability more publicly.
Efforts to streamline and simplify processes can help governments both to achieve lasting efficiency gains and to deliver better policies and services. Government can make better use of digital technologies, restructure and merge government institutions, streamline public procurement to achieve better value for money, and build shared platforms and services for cross-government functions like human resources.
