URUGUAY: PEFA and Improvement of

Fiscal Management

December 2012Michael Borchardt

Positive Aspects of the Pefa Excercise in Uruguay

Uruguay at glance

Synthesis of the Action Plan for Improvement of Fiscal Management

Critical Aspects of the Pefa Excercise in Uruguay

Topics

Uruguay at glance

Population: 3,3 millon inhabitants

Area: 176.215 km2

GDP (estim. 2012 ): 50 billion US$

Literacy rate: 98%

Institutional and Political Stability

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

Gross Domestic ProductReal growth

Uruguay

Latin America

Middle-Income Country with strong growth

6%

Chile Uruguay Brazil Colombia Peru Ecuador Paraguay0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

GDP per cápita, 2011Dollars, adjusted by PPP

Source: World Bank

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

*

-4%

-3%

-2%

-1%

0%

1%

Public Sector Balance % GDP

Sound fiscal performance

Pe

ru

Ch

ile

Co

lom

bia

Bra

zil

Mé

xico

Italy

Po

lan

d

Arg

en

tina

Fra

nce

Po

rtu

ga

l

Sp

ain

Gre

ece

Un

ited

Kin

gd

om

Un

ited

Sta

tes

Uru

gu

ay

Em

erg

ing

Ec.

Ad

van

ced

Ec.

Wo

rld

Ave

r.

-10

-8

-6

-4

-2

0

2

4

Public Sector Balance, 2012% GDP

Source: IMF Fiscal Monitor, October2012. MEF data for Uruguay.

-2.2%

-1.1%

* The effect of drought represents 1% of GDP.

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 201420

30

40

50

60

70

80

90

100

110

Advanced Economies

Emerging Economies

Uruguay

Gross Debt 2001 - 2014Uruguay vs. Group of Countries, % GDP.

Source: IMF, Fiscal Monitor, April 2012. MEF projections

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

2036

2037

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

Central Government Debt Profile% GDP, September 2012

Sustainable debt

Moderate financial

needs

Chile

Uru

guay

Perú

Colo

mbia

Bolivia

Bra

sil

Méxic

o

Venezu

ela

Arg

enti

na

Para

guay

Ecu

ador

0%

2%

4%

6%

8%

2010 2011

Foreing Direct Investment% GDP

Friendly Business Climate Spread

80

180

280

380

480

580

680

780

880

980

EMBI Uruguay EMBI Brasil EMBI Global

Uruguay recovers

investment grade

Inflation is the main challenge for macroeconomic policies

Annual Inflation

Source: INEJu

n-09

Aug-0

9

Oct-09

Dec-0

9

Feb-

10

Apr-1

0

Jun-

10

Aug-1

0

Oct-10

Dec-1

0

Feb-

11

Apr-1

1

Jun-

11

Aug-1

1

Oct-11

Dec-1

1

Feb-

12

Apr-1

2

Jun-

12

Aug-1

2

Oct-12

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Inflation target range

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Poverty

Source: INE, * MEF projection

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

*

35%

37%

39%

41%

43%

45%

Source: Iecon and INE. 5.000 inhabitants or more.

Income Concentration Coefficient (GINI)

A better income

distribution

Significant reduction in

poverty

Positive Aspects of the Pefa Excercise in Uruguay

Uruguay at glance

Synthesis of the Action Plan for Improvement of Fiscal Management

Critical Aspects of the Pefa Excercise in Uruguay

Topics

Positive aspects of the PEFA exercise in Uruguay

• gives an integrated conceptual framework for the evaluation and monitoring of fiscal management

• enables to have a reference point for future evaluations

• contributes in having an integral view of the different processes for improving fiscal management

• the consultant`s role is decisive

Positive Aspects of the Pefa Excercise in Uruguay

Uruguay at glance

Synthesis of the Action Plan for Improvement of Fiscal Management

Critical Aspects of the Pefa Excercise in Uruguay

Topics

• the main problem for the aplication of Pefa in Uruguay

• different institutional and legal frameworks

• emphasis in formal aspects and not always in substance

• over simplification in a standarized methodology of rating: part of the richness of reality is lost

• the fact of qualification can have non desired effects

• does not always consider the different importance of the measured aspects

Critical aspects of the PEFA exercise in Uruguay

Positive Aspects of the Pefa Excercise in Uruguay

Uruguay at glance

Synthesis of the Action Plan for Improvement of Fiscal Management

Critical Aspects of the Pefa Excercise in Uruguay

Topics

DIMENSION DE GFP LINEAS DE ACCIÓN

Credibilidad presupuestaria

Mejora en los procesos de proyección de los créditos presupuestales

Ampliación de la cobertura y mejora en la exposición de la deuda flotante

Temas transversales prioritarios: alcance y

trasparencia

Profundizar la estrategia de reducción de vulnerabilidades en el manejo de deuda

Sistematizar la evaluación de riesgos fiscales

Presupuesto basadoen políticas

Avanzar en el presupuesto para resultados y realizar evaluaciones de intervenciones públicas

Puesta en funcionamiento del Sistema Nacional de Inversión Pública

DIMENSION DE GFP LINEAS DE ACCION

Previsibilidad y control

de la ejecución presupuestaria

Profundizar la vinculación de los créditos presupuestales y la planificación de caja

Fortalecer el Sistema de Cuenta Única del Tesoro

Profundizar las acciones para continuar reduciendo la evasión fiscal y mejorar la coordinación entre los agentes recaudadores

Fortalecer las capacidades de la Auditoría Interna

Contabilidad registro e información

Inicio del proceso para el desarrollo de un nuevo sistema integrado de información financiera

URUGUAY: PEFA and Improvement of

Fiscal Management

December 2012Michael Borchardt