Performance Budgeting Reforms Gather Pace in Latin America

Posted by Marc Robinson

Performance budgeting reforms are being pursued with impressive vigour in Latin America today. This was made very clear to the thousand or so participants from 41 countries who attended an International Conference on Performance Budgeting held Mexico City on June 9-10, 2008. The conference heard in detail about developments in Mexico, Colombia, Brazil, as well as in various OECD countries outside the region.

In Mexico, a new budget law passed in 2006 has reinforced efforts under way for some years to build a strong foundation of program evaluation and performance indicators to inform the budget process. A massive effort is underway to create “logframes”—statements of program outcomes and outputs, with supporting indicators and other information—for all government expenditure. In 2008 alone, 17 major programs will be subject to evaluation, and the aim is that by 2010 at least 75 percent of programs will have been evaluated. Leading these efforts is the Ministry of Finance, with a key guiding role being played by Vice-Minister for Expenditure Dionisio Perez-Jacome.

Chile stands out as a regional (and indeed international) beacon of performance budgeting reform, having built a strikingly successful system over a period of more than a decade. It has been a path-finder in developing the role of practical program evaluation in the budget process. In part because of the influence of the Chilean model, this has now a world-wide trend—as the conference heard in presentations on recent initiatives in Canada, Australia and Korea.

The interest across the continent in performance budgeting reflects an awareness that, with economic performance strong and many governments enjoying strong fiscal positions, improving the quality of public expenditure has become a top priority. However, as speaker after speaker emphasized, performance budgeting is just one element in the wider set of reforms required to improve expenditure quality. Civil service reforms, improved accountability mechanisms, administrative restructuring—just to mention some of the elements—are all essential.

The conference was organized by the World Bank, Inter-American Development Bank, OECD and Mexican Ministry of Finance, with participation by the IMF. IMF staff made two presentations, respectively on the U.K. experience and the information requirements of performance budgeting. The main conference was followed by a first-rate seminar for the Ministry of Finance organized by the OECD, on nuts-and-bolts aspects of performance budgeting.

Comments

[Anand P. Gupta]

I have read with a great interest Marc Robinson’s July 2 post “Performance Budgeting Reforms Gather Pace in Latin America”. It is good to know that the issue of improving the quality of public expenditures has begun to receive the attention it deserves. A good system for improving the quality of public expenditures is one that not only ensures that public resources are properly allocated (that is, no public spending on the wrong goods or the wrong people), but also ensures that the allocated resources are so used that they deliver the intended outcomes. This raises several issues. Examples include: the issue of how to trade off funding needed for literacy programs and funding needed for malaria nets (posted by Allen on April 29); the issue of specifying a detailed production function for something like the rate of crime and then isolating the impact of expenditure on policing or other services (posted by Richard Hughes on May 7); as also the issues like civil service reforms, improved accountability mechanisms, and administrative restructuring that Mr. Robinson has listed. One would very much like to know how the countries that have succeeded in improving the quality of their public expenditures have addressed such issues, and how they have dealt with the obstacles faced while attempting to improve the quality of their public expenditures.