Jon Blondal

1
Budgeting in Brazil
Jon Blondal Deputy Head Budgeting and
Management Santiago, 28 January 2004
2
Agenda

• Background
• Distinctive features
• Annual budget cycle

3
Background

• Real plan
• End of Inflation tax
• Debt restructuring for the States
• High and volatile debt profile
• Fiscal Responsibility Law

4
Distinctive Features

• High degree of rigidity
• Central planning function
• Lack of rolling medium-term expenditure framework

5
High degree of rigidity -over 90 of the budget-

• Constitutional expenditures
• Salaries and pensions for civil servants
• Earmarking of tax revenue
• Insurance against high inflation
• Non-earmarked taxes must be shared
• Mandatory expenditures
• Not subject to presidential decrees

6
Central planning function

• Results-oriented budgeting
• Highlights political priorities
• Designation of mandatory expenditures
• Marketing device for public/private partnerships

7
Medium-term expenditure frameworks

• Not in place in Brazil

8
Annual Budget Cycle

• Budget Guidance Law
• Annual Budget
• Presidential Budget Implementation Decrees

9
Budget Guidance Law

• Aggregate fiscal targets
• Primary balance
• Designation / updates of mandatory expenditures
• Housekeeping issues

10
Annual Budget

• Extreme top-down model
• Letters of totals 3 weeks to finalise
• Appeals process
• No budget submission
• Professionalism varies greatly
• High degree of rigidity
• Role of Congress
• Economic assumptions

11
Presidential Budget Implementation Decrees

• Motivations
• Commitment to fiscal discipline
• Correction of actions by Congress
• General tendency for in-year adjustments
• Drastic effects on small part of budget

12
Conclusion

• System has been very effective in terms of
  aggregate budget control
• Allocative and operational efficiency could be
  improved significantly.

13
Conclusion

• OECD Journal on Budgeting
• www.oecd.org/gov/budget