Barcelona Promotes Fiscal Health and Strong Economic Performance

Posted by Jordi Baños-Rovira[1]

Barcelona City Council has shown what can be done in turning around a huge fiscal imbalances in 2009-11 into a moderate level of debt and a fiscal surplus in 2013. The budget for the fiscal year 2014 shows an 11% increase in expenditures (22% for capital expenditures), prioritizing programs that contribute to the protection of the most vulnerable people and reinforce economic growth, while maintaining a fiscal surplus, freezing tax rates and maintaining a moderate level of debt.

Barcelona’s commitment to sustainable public finances, and to results-oriented management, is key to fostering innovation, entrepreneurship, business development, employment and growth in the city. Its approach to public financial management reflects the standards of good practice adopted in other parts of the EU. The City Council has set the following fiscal targets and goals:

These financial goals were reinforced in 2011 by the adoption of two key measures: first, the harmonization of the City’s “profit and loss accounts” and its overall financial planning and reporting framework with the ESA (the European System of Accounts); second, the commitment towards financial liquidity and the payment of suppliers and providers in less than 30 days, a goal that has been fully achieved and will be extended in 2014 to companies subcontracted by these suppliers.

Barcelona’s financial management system is included within a framework called the “Political and Management Deal” (PMD). This framework has a clear results and accountability orientation, is linked to political priorities (“City goals”) and to the strategic and functional goals of the Council’s departments and executive offices. The main tools of this management system are the Strategic Framework and Executive Budget. The Strategic Framework is Barcelona’s medium-term strategic plan, which sets the City’s institutional values and vision, the political and management goals to be achieved, and a medium-term budget framework. The Executive Budget is a performance-based budgeting system, linked to Barcelona’s three-year rolling medium-term fiscal framework which includes the fiscal targets and a projection of the main budget aggregates in ESA terms.

In recent years substantial efforts have been made to make the budget fully consistent with the ESA framework, and to revise its programmatic structure (programs, subprograms, projects) in order to enhance the allocation of resources according to the priorities and goals set out in the City’s Strategic Framework.

During 2014, some further important improvements to Barcelona’s financial management system will be made:

Barcelona City Council is aware of the major importance of having healthy finances and of managing its resources strategically, efficiently and transparently in order to carry out the social and economic policies that are necessary to improve the quality of life of its citizens.

[1] The author is Director of the Office of Management and Performance Budgeting, Barcelona City Council.

Note: The posts on the IMF PFM Blog should not be reported as representing the views of the IMF. The views expressed are those of the authors and do not necessarily represent those of the IMF or IMF policy.