Transcript Performance Budgeting Lessons from OECD Member countries

Budgeting in Chile
Santiago de Chile, 26 January 2005
Jón R. Blöndal
Deputy Head of Division
Budgeting and Management Division
OECD Country Reviews
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One of the core activities of the OECD
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Chile is observer at the OECD
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Review conducted by the Secretariat in 2003
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Examined at the 2004 OECD meeting of budget directors
Agenda
Sound public finances
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Tumultuous political history
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Private provision of traditional public services
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Structural budget surplus rule
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Bidding fund
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Role of Ministry of Finance
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Role of Parliament
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Transparency
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Sound public finances
Very low debt levels – circa 15% of GDP
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Strong record of budget surpluses over time
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Tumultuous political history
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Economic malaise in the 1970’s used as a pretext by the
military for overthrowing the democratic government
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Unstable political situation following return to
democracy
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Experience of neighbouring countries
Private provision of
traditional public services
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Headline expenditures ~ 20% of GDP
Private provision of “traditional” expenditure ~ 11% of
GDP
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Mandatory pensions: 10% + 2-3% of pay
Mandatory health contributions: 7% of pay
Mandatory unemployment insurance: 1.6% of pay
Significant use of PPP’s
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Contingent liabilities
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Structural Budget Surplus Rule
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To formalize fiscal prudence
To increase fiscal predictability
To operate counter-cyclical fiscal policy
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1% of GDP
Independent panels
In-year adjustments to maintain it
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Calculations of structural balance not considered an issue
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Bidding Fund
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Mechanism for financing new initiatives
– About 2½ percent of total spending
– Financed from critical review of existing programs and from growth in
economy
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To improve quality of budget submissions
– Spending ministries rank their own bids
– Technical quality
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Consistency with political priorities
Role of Ministry of Finance
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Centralised budget process
– Strong Ministry of Finance
– Line-ministries not pro-active
– Risky ?
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Attempt to change this are underway
– Ministries and agencies
Role of Parliament
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Historically, a strong parliament
– Civil war fought over its role in the budget process in the late 1800’s
– Irresponsible fiscal behaviour
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Today, a very weak parliament
– Constitutional restrictions
– No political will for stronger parliament
Transparency
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No budgetary information made available during military rule
– A difficult legacy to overcome
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Great progress has already been made and the government is
committed to further improvements
– Formal agreement between the executive and the Congress to
implement the OECD Best Practices for Budget Transparency
Conclusion
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“An innovative and sophisticated budget process that is
focused on maintaining aggregate fiscal discipline.”
For further information
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www.oecd.org/gov/budget
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OECD Journal on Budgeting
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[email protected]