Governance of the budget in Peru Legislative budget oversight and public finance accountability in p

1
Governance of the budget in Peru Legislative
budget oversight and public finance
accountability in presidential systems

• Carlos Santiso
• with Arturo Garcia Belgrano
• ECLAC XVI Regional Seminar on Fiscal Policy
  Santiago de Chile, 27 January 2004

2
Overview

• Context and introduction
• Budgetary process and fiscal reform
• Delicate balance legislative budgeting,
  political accountability, and fiscal prudence
• Economic governance and legislative budgeting
• Budgetary institutions and government
  accountability
• Legislative budget authority Legal framework
• Constitutional provisions and regulatory
  framework
• Time, timing and sequencing
• Legislative budget oversight Actual practice
• Internal constrains legislative organization
• External constrains governance context

3
Objectives

• Role of parliament in the budget process
• Understanding the budget process and incentives
  and behaviour of multiple agents (parliament)
• Governance of the budget beyond the executive
• Risks to budget governance of unrestrained
  executive discretion
• Hierarchical budgetary institutions
• Horizontal and vertical accountability
• Constraints to and conditions for effective
  budget oversight (internal and external)
• Politics of public budgeting
• Executive-legislative relations
• Formal and informal dynamics

4
Introduction and context (1)

• Newfound interest in role of parliament in public
  budgeting, especially in presidential systems
• Two waves of budgetary reform
• Transparency and efficiency focus on executive
• Accountability and integrity beyond the
  executive
• Four phases of the budget process
• Differentiated roles for executive and
  legislature along the budget cycle (formulation,
  adoption, execution, and control)
• Institutional analysis and political economy
  approach

5
Introduction and context (2)

• Disjuncture between formal powers and actual role
  
• Four sets of explanatory variables
• Legal framework
• Technical capacities
• Political incentives
• Governance environment
• Key challenge ability of institutional
  arrangements to adequately balance political
  accountability and fiscal prudence

6
Budgetary institutions and government
accountability

• Budget reform, hierarchical budgetary
  institutions and fiscal discipline
• Accountability deficit in public budgeting
• Ex ante accountability (policy priorities and
  budget allocations)
• Coincident accountability (execution oversight
  and integrity)
• Ex post accountability (accounting for results)
• New patterns of governance
• Divided government and the rediscovery of
  legislative budgeting

7
Economic governance and legislative budgeting in
Peru

• Economic reform and institutions of economic
  governance
• Modernization of governmental financial
  administration (1993 tax reform, organic budget
  law)
• Building hierarchical budget institutions
  (finance ministry, central bank, tax agency)
• Insulation and vulnerability to capture
• Patterns of executive-legislative budget
  relations
• Confrontation (1990-1992) and rupture (1992)
• Executive dominance (1993)
• Neutralization (1993-2000) and capture
  (1997-2000)
• Restoration of democratic institutions (2001 -)

8
Legislative budget authority (1)

• Legislature and public finance
• Different powers in taxation and budgeting (art.
  74)
• Taxation and budgeting as separate policy
  processes
• Legislative budget powers
• Constitution of 2003, organic budget law of 1999
  revised 2003, and Congress internal rules
• Key features
• Uncommon executive prerogatives
• Neutralization of key legislative powers
• Delegation of legislative authority
• Extensive use of executive decrees

9
TABLE 1 CONSTITUTIONAL RESTRICTIONS ON
LEGISLATIVE BUDGET AUTHORITY IN LATIN AMERICA
10
Legislative budget authority (2)

• Legislative powers along the budget cycle
• Budget formulation and drafting
• Executive has the exclusive right of initiative
  (art. 78)
• Amendment powers and adoption
• Legislature can neither increase the budget nor
  create new budget categories (art. 79)
• If legislature fails to act within the imparted
  time, the executive proposal takes effect by
  legislative decree (art. 80)
• Oversight of budget execution
• Certification of public accounts
• Time, timing and sequencing

11
(No Transcript)
12
(No Transcript)
13
Constraints to effective legislative budget
oversight (1)

• Credibility of the budget
• Budget transparency (legal framework,
  perceptions, enforcement mechanisms)
• Budget rigidity (size, inertia and capital
  expenditures)
• Executive discretion in budget execution
• Budget integrity gap approved-executed
  (under-spending), off-budget expenditures
• Extensive and early uses of executive decrees
  (reallocations)

14
(No Transcript)
15
Constraints (2)
16
Constraints (3)

• Weak institutionalisation of legislative
  budgetary institutions
• Parliamentary structures and procedures
• Parliamentary budget and finance committees
• Legislative technical budget capacity
• Legislative budget research capacity
• Legislative oversight and external auditing
• Relations public accounts committee and general
  audit office
• General audit office (internal and external
  auditing)
• Consequences
• Limited access to independent budget analysis and
  advise
• Limited availability of timely information on
  budget performance

17
Constraints (4)

• Unrestrained executive discretion
• Presidential nature of political regime and
  executive-legislative relations
• Executive decree authority and legislative
  delegation (how much is too much?)
• Insulation of economic policymaking and
  institutions of economic governance (veto knots
  or accountability points) (ex. general audit
  office)
• External oversight and social control

18
Constraints (5)

• Political system and legislative budgeting
• Vertical determinants of horizontal
  accountability
• Political parties and electoral rules
• Political party system fragmented and volatile
• Party cohesion, coherence and discipline
• Party structures, parliamentary groups and
  legislative committees

19
Concluding remarks

• Key challenges
• Adequate balance between executive power and
  legislative oversight How to retain the
  advantages of strong executive authority required
  to ensure fiscal discipline while providing the
  institutional checks and balances that guarantee
  effective accountability
• The politics of legislative budgeting
• Different roles for different phases of budget
  cycle (oversight and accountability roles of
  parliament)
• Technical capacity, institutional arrangements
  and political incentives
• Chicken and egg dilemma technical capacities
  and political incentives

20
Thank you