Posted by Israel Fainboim
Strong macrofiscal capacity—for macroeconomic and fiscal analysis, policy formulation, and forecasting—is key to a government’s ability to ensure that its policies are sound and sustainable. The need to develop this capacity exists in all countries: the ministry of finance needs to be able to hold its own against other institutions, including the central bank and multilateral institutions. A ministry of finance can strengthen its ability to provide a sound basis for preparing the annual budget and medium-term budget frameworks by centralizing all macrofiscal functions in a single unit.
Many developing countries still have weak macrofiscal capacity. Peru provides a case where this capacity was developed rapidly and where the result is an effective and capable macrofiscal unit (DGAES). This example could provide a useful reference for similar countries, even though the unit still faces important challenges. The attached note identifies the present activities and strengths of the DGAES and the tasks that need to be strengthened within the directorate. It also identifies and discusses key factors that can affect its effectiveness (such as its staffing and the quality of the information used) and suggests some improvements.
Download PERU Achievements and Challenges for Developing an Effective Macrofiscal Unit
