Source says that government will evaluate program results and plan expenditures for up to four years
03/27/2023
When the new fiscal framework comes into effect, the Brazilian budget will be based on a tripod, according to a government source. The trajectory of public accounts outlined by the new rules will be supported by a “backward” look, which will come from the evaluation of public policy results, and a “forward” look, through a budget that will plan expenditures for a period of three or four years.
These changes, which are being formulated by the Ministry of Planning, will bring Brazil’s budget management in line with the best practices adopted around the world. According to the source, the Organization for Economic Co-operation and Development (OECD) experienced a boom of innovations in this area after the 2008 crisis. Since then, advanced economies have adopted these new practices. Brazil was a bit behind in this process, he commented.
The medium-term budget is the great innovation that the current government intends to implement. One of its qualities, according to the government member, is to clarify the “trade-offs” in public spending.
Since there are not enough funds to carry out all the actions the government would like to take, it will be necessary to choose priorities. The consequences of these choices are easier to visualize over a longer period.
The first budget proposal in this format will be presented next year. It will be valid until 2025 and will include projections for the following years.
In turn, the evaluation of public policies will allow spending to be reduced with more discretion. In the absence of this type of information, the most common practice in recent years has been to make across-the-board spending cuts. With evaluation, programs that are not producing the desired results can be eliminated or corrected, thereby improving the quality of public spending.
Behind the scenes, this new structure is being called “Budget by Performance 2.0.” Version 1.0 is the legislation drafted in 1964 and is still in force today. At the time, it was the state of the art.
Another government source said that it will not be enough to look at the new framework to understand the future trajectory of public accounts. The rule, he said, will be complemented by other instruments, such as the annual budget and the draft of the Budget Guidelines Law (LDO), and the multi-year plan (PPA).
The first of these instruments is the LDO project. The deadline for its submission to Congress is April 15.
The main element of this bill is the primary result target. Economy Minister Fernando Haddad has said that the goal is to reduce the public deficit to zero next year.
The proposal for the 2024 LDO will be prepared based on the current legislation. That is, it will take into account the spending cap. And it will include provisions for the transition to the new framework when it comes into force.
The drafts of the 2024 annual budget bill (PLOA) and the PPA are expected to be submitted to the Legislature by August 31.
Por Guilherme Pimenta, Lu Aiko Otta — Brasília
Source: Valor International