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December 23, 2013

Strengthening the Capacity of Parliaments in the Budget Process

Posted by Carlos Santiso and Marco Varea*

In the past decade, parliaments in many parts of the world have flexed their muscles by demanding more information about the government’s performance in managing public resources. In the Latin America and the Caribbean region, however, the capacity of the parliament to influence budgetary matters—and more generally fiscal policy and public financial management— is hindered not only by the centralized nature of the budget process, but also by the legislature’s lack of technical and institutional capacity.

A recently issued policy brief "Strengthening the Capacities of Parliaments in the Budget Process" argues that the creation of a parliamentary budget office (PBO) can help strengthen the effectiveness and accountability of parliaments in the budget process. PBOs have been established in several countries in the region—including Brazil, Chile, Costa Rica, the Dominican Republic, El Salvador, and Mexico—and are under consideration elsewhere. These offices can help strengthen the parliament as a competent and constructive partner with the finance ministries, and compensate for the legislature’s limited technical capacity and influence in budget matters. The policy brief argues that PBOs can help reduce asymmetries in and simplify the presentation of fiscal information, improve the quality of budget analysis, enable a more constructive budget debate, and improve the alignment of incentives among government branches.

The paper analyzes the conditions for creating and maintaining these offices, evaluates the effectiveness of such institutional changes, and weighs the lessons learned from the recent experience of various countries in the region. The conclusion is that parliaments can strengthen their impact on the budgeting process not necessarily by increasing their budgetary powers, but by improving their institutional capacity to exercise those powers more effectively and responsibly.

* Carlos Santiso is Division Chief, Institutional Capacity of the State, at the Inter-American Development Bank (IDB). Marco Varea is a consultant in the same division.

 

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