As we saw in Chapter 10, governments can seek to achieve fiscal credibility by signaling their future fiscal intentions. They commonly do so by cutting themselves off from access to certain financing sources, something that they would be unlikely to do if they anticipated requiring recourse to those sources of finance in the future. Yet we also saw in Chapter 10 that while this may help to signal the seriousness of the government's fiscal intentions, and may even help to discipline future governments not similarly inclined to fiscal rectitude as the one that institutes the measure (see Chapter 18), the impact of such measures on the public sector's perceived solvency is problematic because actual and potential creditors will correctly perceive that the government has deprived itself of a source of funds with which to service debt.

An alternative approach to enhancing the credibility of fiscal adjustment is to lock in the adjustment in present value terms by undertaking measures in the present that are irreversible – or at least, that are very costly to reverse – and that can be expected to exert favorable effects on the government's budget over the indefinite future. Chapter 11 described how the implementation of fiscal rules and reforms of the budgetary process could help to commit the government to responsible future fiscal behavior. These reforms operate by constraining the fiscal actions of future governments and, in that sense, function as commitment devices.