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Emmanuel Abuelafia, Sergio Berensztein, Miguel Braun and Luciano di Gresia

Who decides on Public Expenditures? A Political Economy Analysis of the Budget Process: the case of Argentina. Emmanuel Abuelafia, Sergio Berensztein, Miguel Braun and Luciano di Gresia.

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Emmanuel Abuelafia, Sergio Berensztein, Miguel Braun and Luciano di Gresia

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  1. Who decides on Public Expenditures? A Political Economy Analysis of the Budget Process: the case of Argentina Emmanuel Abuelafia, Sergio Berensztein, Miguel Braun and Luciano di Gresia Av. Callao 25, 1° • C1022AAA Buenos Aires, Argentina - Tel: (54 11) 4384-9009 • Fax: (54 11) 4371-1221 • info@cippec.org • www.cippec.org

  2. Outline of the presentation • The PMP in Argentina and literature review • A (very brief) overview of the formal budget process • The actual workings of the budget process • Conclusions and recommendations

  3. The PMP in Argentina Outer features of policies Deep determinants Nature of the PMP Institutional Legacies 1930-1983 • Short horizons • for policymakers • and interest • groups • Weak arenas • for intertemporal • deals • Congress • Policy • instability • Lack of • coordination • Lack of • cooperation Constitution and electoral rules

  4. Implications for the budget process • The President is strong vis a vis Congress • Provincial governors are powerful informal actors • Weak and unstable bureaucracy, which limits budget efficiency • Instability in budget outcomes

  5. Other papers • Jones (2001): Congress has an important role in the budget process. • Rodriguez and Bonvecchi (2005): the role of Congress is weak. • The evaluation of the role of Congress depends on the universe of public expenditure that one analyzes.

  6. The National Budget 2004

  7. Degree of Exogeneity • We constructed an index that reflects how much the public expenditure deviates from its trend. dSit = β0 + β1 dSi(t-1) + β2 dGDPt + β3 dPOPt + +β4 dPRIt+ β5 dEMPt + β6 dDEBt + + wt (1 + β7 dGDPt + β8dPRIt) + uit Zit = Abs(uit ) / Sit

  8. Discretionality of Public Expenditure

  9. A brief history of fiscal outcomes

  10. The formal budget process

  11. The actual workings of the budget process • The President is the key actor, and he maximizes his goals subject to the constraints set by the rigidity of the budget, fiscal rules and agreements with IFIs. • He also has to deal with macroeconomic shocks and other powerful actors. (governors, lobbies, IFIs)

  12. The actual workings of the budget process • What are the President´s goals? • Obtaining reelection (political coalition) • Favorable public opinion (macro stability, national public goods) • Helping his home province (pork)

  13. Strategic use of revenue forecasts

  14. Changes made by Congress and Executive

  15. Δ Composition by Congress and Executive

  16. Implementation • High volatility of ministers and secretaries. (Average duration: 2.36 years). • The institutional capacities are undermined by • Lack of incentives faced by permanent bureaucrats • Lack of experience of parallel bureaucrats • The purchasing mechanism requires a high institutional capacity. • Then, the degree of execution will be lower the less experienced the minister is. • The bureaucratic work may involve a learning process.

  17. Bureaucratic learning

  18. An exception: • The Ministry of Economy. • The average seniority of the Ministry of Economy employees is around 23 years, 15% higher than the average seniority of all the SINAPA´s employees (20 years). Compared with the other agencies, the Ministry is in the top of the employees´ seniority distribution. • The educational level of the Ministry of Economy’s bureaucracy is above the average. 38% of the total Ministry’ s employees have tertiary education, two times more than the Ministry of Internal Affairs and 20% more than the SINAPA´s average. • The Ministry of Economy has a higher proportion of upper echelons. 44% of its employees are in the top 3 categories, compared with the system average of 38%.

  19. Extra Budgetary Funds Agencies that consolidates in the Public Sector Budget: AFIP, INCAA, INNSJyP Entities and Funds that do not consolidate: Fondo Especial del Tabaco, National Universities, Yacyreta, Fondo solidario de Redistribucion.

  20. Evaluation and Control • SIGEN: depends on the President. • AGN: depends on Congress. • Evaluation is weak. • Audits are scarce, not timely, only legal compilance and not an effective tool.

  21. Conclusions • Actual workings of the BP are consistent with Spiller-Tommasi description of Argentine PMP • - Executive as key actor • Some surprises: The bureaucracy that deals with the BP is stable and competent.

  22. Recommendations • Strengthen coordination mechanisms between the federal and provincial governments • Capacity building in Congress • Strengthen expenditure evaluation • Use of private forecasts for budgeting

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