a political economy analysis of the budget process in colombia mauricio cárdenas carolina mejía...
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A Political Economy Analysis of the Budget Process in
Colombia
Mauricio CárdenasCarolina Mejía
Mauricio Olivera
Fedesarrollo
August 31, 2006
Outline
1. Motivation2. Key budgetary outcomes3. Budget inflexibilities 4. Formal rules5. Key players and the budget process
in practice6. Empirical evidence7. Conclusions
Outline
1. Motivation2. Key budgetary outcomes3. Budget inflexibilities 4. Formal rules5. Key players and the budget process
in practice6. Empirical evidence7. Conclusions
Motivation
• Fiscal outcomes have been disappointing
• Political institutions are an important part of the explanation of the changes in fiscal performance
• Role of the budget process has received little attention
• Here we focus on the budget process from a political economy viewpoint
Outline
1. Motivation2. Key budgetary outcomes3. Budget inflexibilities 4. Formal rules5. Key players and the budget process
in practice6. Empirical evidence7. Conclusions
SustainabilityCentral Government’s deficit:
Opposite trends relative to the region
-10
-8
-6
-4
-2
0
2
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
% P
IB
Colombia Latinoamérica
Source: Banco de la República, ECLAC, IMF, and Ministerio de Hacienda.
AdaptabilityOutput gap vs. fiscal thrust
(change in the cyclical component of the primary surplus)
Source: Authors’ calculations using data from Ministerio de Hacienda.
2005
2004
2003
200220012000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
19881987
1986
1985
19841983
1982
-0,05
-0,04
-0,03
-0,02
-0,01
0,00
0,01
0,02
0,03
0,04
0,05
-2,0 -1,5 -1,0 -0,5 0,0 0,5 1,0 1,5 2,0
Impulso fiscal (% del PIB)
Bre
cha
del
PIB
(lo
gs)
EfficiencyExcessive expenditures relative to outcomes
Primary education
Bolivia
Brasil
Chile Colombia
Costa Rica
Ecuador
El Salvador
Guatemala
Honduras
México
Nicaragua
Panamá
Paraguay
Perú
República Dominicana
Uruguay
Venezuela
Latin America & Caribbean
80
82
84
86
88
90
92
94
96
98
100
2 2,5 3 3,5 4 4,5 5 5,5 6
Gasto en educacion (% del PIB)
Mat
ricu
lad
os
en p
rim
aria
(%
net
o)
Source: Authors’ calculations using data from World Bank Indicators.
Likewise for health outcomes
ZWE
ZMB
ZAR
ZAF
YUG
YEM
WSM
WLDVUT
VNM
VEN
VCTUZB
USAURY
UMC
UKR
UGA
TZA TUR
TUN
TTO TON
TMP
TKM
TJK
THA
TGO
TCD
SYRSYC
SWZ
SWE
SVN
SVK
SUR
STP
SSA
SOM
SMR
SLV
SLE
SLB
SGP
SEN
SDN
SAU
SAS
RWA
RUS
ROM
QAT
PRY
PRT
PRK
POL
PNG
PLW
PHL
PER
PAN
PAK
OMN
OEC
NZL
NPL
NOR
NLD
NIC
NGA
NER
NAM
MYS
MWI
MUS
MRT
MOZ
MNG
MNA
MMR
MLT
MLI
MKD
MIC
MHL
MEX
MDV
MDG
MDA
MCO
MARLVA LUX
LTU
LSO
LMY
LMC
LKA
LICLDC
LCA
LBY
LBR
LBN
LAO
LAC
KWTKOR KNA
KIR
KHM
KGZ
KEN
KAZ
JPN
JOR
JAM
ITAISR ISL
IRQ
IRN
IRL
IND
IDN
HUN
HTI
HRV
HPC
HNDHIC
GUY
GTM
GRD
GRC
GNQ
GNB
GMB
GIN
GHAGEO
GBR
GAB
FSM
FRA
FJI
FIN
ETH
EST ESP
ERI
EMU
EGY
ECU
ECA
EAP
DZA
DOM
DNKDMA
DJI
DEU
CZECYP CUB
CRI
CPV
COM
COLOMBIA
COG
CMR
CIV
CHN
CHL
CHE
CAN
CAF
BWA
BTN
BRN
BRB
BRA
BOL
BLZ
BLR
BIH
BHSBHR
BGR
BGD
BFA
BEN
BEL
BDI
AZE
AUT
AUS
ATG
ARM
ARG
ARE
ALB
AGOAFG
ADO
20
30
40
50
60
70
80
90
100
0 1 2 3 4 5 6 7 8 9 10
Gasto publico en salud (% del PIB)
Imm
un
izac
ion
tri
ple
vir
al (
% d
e n
ino
s en
tre
12
y 23
mes
es)
Source: Authors’ calculations using data from World Bank Indicators.
Representativeness
• The 1991 increased the number of players that participate in the budget process.
• Congress and the Constitutional Court play a much larger role.
• In addition, the pluralistic Consejo Nacional de Planeación must approve each administration's development plan before it submitted to Congress.
Outline
1. Motivation2. Key budgetary outcomes3. Budget inflexibilities 4. Formal rules5. Key players and the budget process
in practice6. Empirical evidence7. Conclusions
Budget inflexibilities
• This is the focus of most of the recent literature dealing with Colombia’s fiscal problems.
• According to the IMF (2004), Colombia is the country with the largest share of earmarked expenditures.
• Most of the rigidities are embedded in the Constitution, rulings of the Constitutional Court, or laws approved after the 1991 Constitution.
• In an environment characterized by many players, short horizons, lack of enforcement devices, rigid rules emerge as a natural outcome of the policymaking process.
Inflexibilities originated after 1991Earmarked revenues according to year of creation
(% of total 2003 budget)
Source: Ministerio de Hacienda
Inflexibilities: Constitutional Examples
• According to Art. 350, public social expenditure has priority over any other type of expenditure and may not be reduced (as percentage of the total budget) from one year to another.
• Similarly, the Constitution increased territorial transfers substantially (Art. 356) and allowed earmarking of revenues for social expenditure.
• Main problem: definition of public social expenditure is too broad.
Total vigencias futuras approved per year
0,0%
0,5%
1,0%
1,5%
2,0%
2,5%
3,0%
3,5%
4,0%
4,5%
5,0%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006*
% P
IB
*Proyected.Source: Datos del DNP, cálculos de los autores.
Inflexibilities: the role of the executive (vigencias futuras % of each year's investment
budget)
Source: Authors’ calculations using data from Ministerio de Hacienda.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
% d
el p
resu
pu
esto
de
inve
rsió
n d
el P
GN
“Vigencias Futuras” by sector
0%
10%
20%
30%
40%
50%
60%
1995-1998 1999-2002 2003-2006
% r
ub
ro in
vers
ión
PG
N
Transporte Defensa y seguridad Agro Saneamiento Básico
0%
10%
20%
30%
40%
50%
1995-1998 1999-2002 2003-2006
% r
ub
ro in
vers
ión
PG
N
Vivienda Comunicaciones Justicia Industria y Comercio
0%
5%
10%
15%
20%
25%
1995-1998 1999-2002 2003-2006
% r
ub
ro in
ver
sió
n P
GN
Salud Energía Medio Ambiente Desarrollo Comunitario Educación Trabajo y seguridad social
Source: Authors’ calculations using data from Ministerio de Hacienda.
Is the Budget Process Relevant?
• Many of these rigidities precede and constrain the budget process.
• But there is still a significant portion of resources to be allocated.
• More importantly, according to the Organic Budget Law, the Annual Budget Law may overrule expenditure mandated by other laws.
Outline
1. Motivation2. Key budgetary outcomes3. Budget inflexibilities 4. Formal rules5. Key players and the budget process
in practice6. Empirical evidence7. Conclusions
Budget Process: Formal rules of the formulation, discussion, and execution of
the budget 1. Law 38 of 1989:
• More flexibility to the line ministries to program their own expenditures
• Created the Consejo Nacional de Política Fiscal (CONFIS) and the Banco de Proyectos de Inversión (BPIN) to implement ex-ante cost-benefit analysis of investment projects.
2. The 1991 Constitution• More rigidities• More representativeness
3. Development Plan Law (Ley 152 de 1994) 4. Organic Budget Law - EOP (Decreto 111 de 1996)
• Compilation of previous legislation5. Fiscal Responsibility Law (Ley 819 de 2003) and
Decree 4730 of 2005.
How relevant is the planning stage? Development Plan vs. Final Execution (% GDP)
4,35%
-0,46%
0,21%
-6,21%
-0,19%
-2,71%
0,71%0,02%
-1,15%-0,12%
2,59%
-1,28%
-0,92%
0,32%
-2,43%
-0,89%
0,09%0,09%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
% d
el P
IB
1999-2002 2002-2006
Source: Authors’ calculations using data from Ministerio de Hacienda and DNP.
Comparative evidence
Source: Filc and Scarstascini (2005)
CountryLow
RestrictionsMid
RestrictionsHigh
RestrictionsMain Modification
Argentina Fiscal Responsibility LawBoliviaBrazil Fiscal Responsibility LawColombia Fiscal Responsibility LawChile Structural Balance RuleCosta RicaEcuador Fiscal Responsibility LawHonduras Pluriannual PlanMexico Fiscal Responsibility LawNicaraguaPanama Fiscal Responsibility LawParaguayPeru Fiscal Responsibility LawDominican Rep.Uruguay Venezuela Fiscal Responsibility Law
Numeric Restrictions
Country Low Hierarchy Mid Hierarchy High Hierarchy
Argentina BoliviaBrazil ColombiaChileCosta RicaEcuadorHondurasMexicoNicaraguaPanamaParaguayPeruDominican Rep.Uruguay Venezuela
Procedure Rules
Country Low Transparency Mid Transparency High Transparency
Argentina BoliviaBrazil ColombiaChileCosta RicaEcuadorHondurasMexicoNicaraguaPanamaParaguayPeruDominican Rep.Uruguay Venezuela
Transparency Rules
Outline
1. Motivation2. Key budgetary outcomes3. Budget inflexibilities 4. Formal rules5. Key players and the budget process
in practice6. Empirical evidence7. Conclusions
Who are the key players?• President
– Although extremely powerful, the 1991 Constitution limited legislative powers (e.g., state of emergency and capacity to veto legislation).
• Cabinet– Extremely high turnover.– Expenditure ministers tend to follow political
careers.Ministros del gasto
Duración promedio (años) 1970 - 2006
Ministro de Agricultura 1.38Ministro de Protección Social* 1.57Ministro de Minas y Energía 1.33Ministro de Educación 1.57Ministro de Comunicaciones 1.38Ministro de Transporte 2.12Total 1.52
Ministro de Hacienda y Crédito Público 1.71*Antes de 2002 corresponde a Ministro de Salud
Who are the key players?• Congress
– Bicameral.– Each chamber is organized in seven committees,
according to policy areas.– The economic committees (3rd and 4th),
together with the constitutional committee (1st), are highly valuated by legislators. However, it is very difficult to become a member.• Legislators in these committees (specially in
Senate) show high incumbency rates and are very specialized.
– Another powerful committee is the Comisión de Crédito Público, in charge of approving all public debt operations.
Senate: 3rd committee composition 1991-2006
Nombre Partido Presidente Reelegido Nombre Partido Presidente ReelegidoVictor Renán Barco López Liberal 3S Victor Renán Barco López Liberal 3SJuan José García Romero Liberal 3S Juan José García Romero LiberalAurelio Iragorri Hormaza Liberal 3S Aurelio Iragorri Hormaza Liberal 3SJuan Manuel López Cabrales Liberal Si 3S Juan Manuel López Cabrales Liberal Si 3SLuis Fernando Londoño Capurro Liberal Si 3S Carlos Armando García Orjuela Liberal 3SLuis Guillermo Vélez Trujillo Liberal Si 3S Luis Fernando Londoño Capurro Liberal Si 3SFuad Ricardo Char Abdala Liberal 2S Camilo Sánchez Ortega Liberal 3SMaría Isabel Cruz Velasco Conservador 3S Luis Guillermo Vélez Trujillo Liberal Si 3SJorge Alberto Hernández Restrepo Otro 3S María Isabel Cruz Velasco ConservadorPedro Antonio Bonnett Locarno Liberal Jorge Alberto Hernández Restrepo OtroArmando Echeverri Jiménez Conservador Enrique Caballero Aduen Otro SiMaría Izquierdo De Rodríguez Liberal 2S Juan Martín Caicedo Ferrer Liberal 1SRodrigo Marín Bernal Conservador Piedad Córdoba De Castro Liberal 5SAníbal Palacio Tamayo Coalicion Gabriel Muyuy Jacanamejoy OtroTiberio Villareal Ramos Liberal 4C Guillermo Ocampo Ospina Conservador 2S
Juan Camilo Restrepo Salazar Conservador
Nombre Partido Presidente Reelegido Nombre Partido Presidente ReelegidoVictor Renán Barco López Liberal 3S Victor Renán Barco López Liberal SiAurelio Iragorri Hormaza Liberal 3S Aurelio Iragorri Hormaza* Liberal SiJuan Manuel López Cabrales Liberal 3S Juan Manuel López Cabrales Liberal Si SiPiedad Zuccardi Liberal 3S Piedad Zuccardi* Liberal SiCarlos Armando García Orjuela Liberal Si 3S Carlos Armando García Orjuela Liberal Si SiLuis Fernando Londoño Capurro Liberal Camilo Sánchez Ortega Liberal SiCamilo Sánchez Ortega Liberal 3S Jaime Dussán Calderón Otro SiLuis Guillermo Vélez Trujillo Liberal 2S Omar Yepes Alzate Conservador SiFuad Ricardo Char Abdala Liberal 2S Gabriel Zapata Correa Conservador Si SiJaime Dussán Calderón Otro 3S Luis Elmer Arenas Otro SiOmar Yepes Alzate Conservador Si 3S Javier Enrique Cáceres Leal Liberal SiGabriel Zapata Correa Conservador Si 3S Juan Manuel Corzo Román Conservador SiGabriel Camargo Salamanca Coalicion Si Mario Salomón Nader Muskus Conservador Si SiIsabel Célis Yañez Conservador José Darío Salazar Cruz Conservador SiJosé Antonio Gómez Hermida Conservador Luis Eduardo Vives Lacouture Liberal Si
Cuatro periodosTres periodosDos periodos
NOTA: en la casilla de reelegido aparece el numero de la comision y si pertenece a Camara o Senado.\*Pertenece a la Comision Interparlamentaria de Credito Publico
1991-1994 1994-1998
1998-2002 2002-2006
Sponsors secure the passage of the Budget Bill through Congress
0
5
10
15
20
25
30
1982
1983
1986
1987
1992
1994
1995
1996
1997
1999
2000
2001
2002
No
. d
e p
on
en
tes
Ley Anual de Presupuesto* Establecimientos Públicos
*Desde 1990 la Ley Anual de Presupuesto comprende a los Estableicimientos Públicos.
Source: Authors’ calculations using Fedesarrollo’s bills database.
Negotiating with Congress
• The executive’s main instrument to secure coalitions in Congress is the inclusion of investment projects (mostly regional and local) promoted by the legislators.
• The shape of these mechanism has changed throughout the years– Pre-1991: the infamous auxilios parlamentarios
(prohibited by the 1991 Constitution)– 1991-onwards: specific investment projects and
global line-items included in the Budget Law.• Most of the negotiation takes place during the
debates in the economic committees rather than during the plenary sessions.
Examples of vehicles used(as a % of total budget)
Source: Authors’ calculations using data from Ministerio de Hacienda.
Año
Fondo de Cofinanciación
para la Inversión Social (FIS)
Fondo de Cofinanciación
para la Inversión Rural (DRI)
Fondo Nacional de Caminos Vecinales
(FNCV)
Fondo Nacional de Regalías (FNR)
1990 0,2% 0,8%1991 0,4% 0,8%1992 0,3% 0,6%1993 0,5% 0,6%1994 1,3% 1,0% 0,4%1995 1,4% 0,8% 0,2% 0,8%1996 1,4% 0,5% 0,2% 1,1%1997 0,8% 0,3% 0,1% 1,1%1998 0,3% 0,4% 0,1% 0,7%1999 0,1% 0,1% 2,4%2000 0,0% 0,1% 2,5%2001 0,2% 0,3% 5,6%2002 0,1% 0,1% 4,2%2003 0,0% 1,8%2004 1,3%2005 0,9%
Who are the key players?
• Constitutional Court– Created in the 1991, the Constitutional Court is a
very influential actor in the CBP, through the revision of bills, statues, treaties and rulings of tutelas.
– The fiscal implications of some of its latest rulings are noteworthy:• Public sector wages • Displaced population• Pension reforms in the last 15 years
– In practice, even if the executives secures an agreement with Congress, the Constitutional Court is a de-facto veto player.
Rulings of the Constitutional Court with budget implications:
An example• Four rulings on public sector wages• Constitutional revision of the 2000 budget law• All of them refer to Art. 53 of the Constitution
(Estatuto de los trabajadores) which establishes the “minimum fundamental principles”
• Remuneración mínima vital y móvil, estabilidad en el empleo, irrenunciabilidad a los beneficios mínimos establecidos, facultades para transigir y conciliar sobre derechos inciertos y discutibles, garantía a la seguridad social.
• Periodic readjustment of legal pensions
Specific rulings on public wages
• 2000: adjusted all public wages according to past year's inflation rate.
• 2001: Wages below the weighted average were raised according to the inflation rate. Remaining wages could be raised by less than the inflation rate.
• 2003: Wages below two minimum wages rose according to past year’s inflation rate. Other wages should increase by, at least, 50% the inflation rate.
• 2004: In a Presidential term (four years) wages should be adjusted according to that period’s inflation rate.
Outline
1. Motivation2. Key budgetary outcomes3. Budget inflexibilities 4. Formal rules5. Key players and the budget process
in practice6. Empirical evidence7. Conclusions
Changes in the budget’s amount and composition
• Stage I: from the Projecto de Ley (Budget Bill) to Ley de Presupuesto (Budget Law). These changes reflect the cost of approving the budget bill in Congress.
• Stage II: from the Ley de Presupuesto (Budget Law) to Final Appropriation (include all modifications during the fiscal year).
• Stage III: from Final Appropriation to Final Execution. Measure of efficiency of execution agencies.
Measuring amount changes in stage IBudget proposal vs. budget bill
Source: Authors’ calculations using data from Ministerio de Hacienda.
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003
% P
IB
-0.6%
-0.4%
-0.2%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003%
PIB
Funcionamiento Deuda Inversión
Total Budget Components
• The average increase in this stage was 0.41% of GDP (0.51% since 1991).
• The average change in the investment component was 0.28% of GDP (0.34% since 1991)
Source: Authors’ calculations using data from Ministerio de Hacienda.
-1%
0%
1%
2%
3%
4%
5%
6%
7%
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003
% P
IB
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003
% P
IB
Funcionamiento Deuda Inversión
Total Budget Components
• The biggest modifications (in terms of magnitude) take place during this stage.
• After 1991, net budget additions declined notably (2.7% GDP vs. 0.94% GDP).
Measuring amount changes in stage IIBudget bill vs. final appropriation
Example: the 2001 supplementary budgetMayor transformations to the supplementary budget bill reflect the
introduction of regional investment projects.
Source: Authors’ calculations using Proyecto de Ley 158 de 2001 y Ley 710 de 2001.
Proyecto de Ley 158 de 2001
Ley 710 de 2001
Departamento Administrativo Nacional de Planeación 8,39% 8,39%Ministerio de Minas y Energía 2,86% 2,86%INURBE 0,20% 0,49%Fondo Nacional de Caminos Vecinales (FNCV) 0,39% 0,62%Fondo de Cofinanciación para la Inversión Rural (DRI) 0,57% 0,79%Ministerio de Desarrollo 0,21% 0,37%INVIAS 0,96% 1,09%SENA 1,12% 1,23%Escuela Superior de Administración Pública (ESAP) 0,00% 0,07%Ministerio de Cultura 0,12% 0,18%IPSE 0,19% 0,25%COLDEPORTES 0,30% 0,36%Ministerio de Agricultura 1,00% 1,05%Policía Nacional 0,22% 0,23%Ministerio de Salud 0,00% 0,01%Otros 6,37% 6,36%Total 22,90% 24,33%*De la Ley de Presupuesto de 2001
Adiciones como % del presupuesto de inversión de 2001*
Entidad
Source: Authors’ calculations using data from Ministerio de Hacienda.
-2.5%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003
% P
IB
-1.8%
-1.6%
-1.4%
-1.2%
-1.0%
-0.8%
-0.6%
-0.4%
-0.2%
0.0%
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003
% P
IB
Funcionamiento Deuda Inversión
Total Budget Components
• Under-execution is typically larger for investment projects
Measuring amount changes in stage IIIFinal appropriation vs. Execution
Construction of indexes: changes in composition
1). Stage I: for each year.
2). Stage II: for each year. 3). Stage III: for each year.
Where Pi = component i as a % of total budget in Projecto de Ley (Budget Bill)
Li = component i as a % of total budget in Ley de Presupuesto (Budget Law)
Ai =component i as a % of total budget in Final Apropriation Ci =component i as a % of total budget in Final Execution N= number of components (three in this case)
N
LPI
N
iii
1
1
N
ALI
N
iii
1
2
N
CAI
N
iii
1
3
Changes in budget composition
Source: Authors’ calculations using data from Ministerio de Hacienda.
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003
Índ
ice
Etapa I Etapa II Etapa III
• Same as before, the largest modifications took place in stage II.
• For all three stages, there are less changes among elements after 1991.
Determinants of modifications in Stage II
Variable dependiente
Etapa II: De la Ley de Presupuesto a la Apropiación Definitiva
Cambio en monto total -1,394 0,197 0,100 -0,470 -0,119(0,331) *** (0,101) * (0,031) *** (0,140) *** (0,042) ***
Cambio en monto funcionamiento -0,354 -0,007 0,043 -0,148 -0,057(0,173) * (0,065) (0,019) ** (0,079) * (0,025) **
Cambio en monto deuda -0,167 0,035 0,002 -0,038 0,007(0,132) (0,016) ** (0,009) (0,051) (0,020)
Cambio en monto inversión -0,870 0,171 0,055 -0,285 -0,070(0,162) *** (0,070) ** (0,021) ** (0,079) *** (0,023) ***
Cambio en composición -1,161 0,247 0,005 -0,311 -0,008(0,396) *** (0,245) (0,056) (0,258) (0,060)
Estimación por Mínimos Cuadrados Ordinarios, errores estándar robustos en paréntesis. Variables no reportadas: dummy primer año de gobierno, dummy último año de gobierno y una dummy para el año 1992. Número de observaciones: 36.
Interacción Post 1991 y Var.
% TCR
Interacción Post 1991 y Ciclo Económico
Post 1991Ciclo
EconómicoVar. % TCR
tt
ttttEi
TCRDPost
CicloEcoDPostTCRCicloEcoDPostmonto
*1991
*19911991
5
43210,
Outline
1. Motivation2. Key budgetary outcomes3. Budget inflexibilities 4. Formal rules5. Key players and the budget process
in practice6. Empirical evidence7. Conclusions
Conclusions
• Poor outcomes in terms of sustainability, adaptability and efficiency.
• Part of the problem are the large inflexibilities that result from a more contested political scenario (cooperation is harder to attain in the budget process and rigidities secure coalitions).
• However, formal rules and real practices are also important elements of the explanation.
• The mayor modifications to the budget don’t take place in the passage of the Budget Bill through Congress.– Moreover, additional resources in this stage were
moderate (on average, 0.41% of GDP).
Conclusions
• Changes take place in the second stage:– The executive negotiates support for other
legislative initiatives through regional investment projects, and
– Congress takes advantage of the supplementary budget petitions of the executive.
– Nevertheless, since 1991, there have been less changes during this stage.
• In short, Congress has more relative power than the formal rules predict.
• The same occurs with the Constitutional Court: the fiscal implications of it’s rulings and revisions are considerable.
Policy Recommendations• Reduce the use of inflexibilities in the budget
– Narrow down the definition of public social expenditure– Limit the use of Vigencias Futuras to investment projects
included in the administration’s Plan de Desarrollo and for a maximum of eight years (also helps to enhance the connection between planning and execution).
• Abolish the Comisión Interparlamentaria de Crédito Público.
• Establish that all investment projects included in the Budget Law should have an ex ante technical approval of the DNP.
• Require a technical report for all Constitutional Court rulings with a significant fiscal impact.
• Avoid the presentation of supplementary budgets in Congress, which implies a more careful programming of revenues and expenditures.