Download Chile`s Advisory Fiscal Council

Chile’s Advisory Fiscal Council
Klaus Schmidt-Hebbel
President, AFC, Chile
Sixth Annual Meeting of OECD Parliamentary
Budget Officials and Independent Fiscal Institutions
The Knesset, Jerusalem
31 March - 1 April 2014
Chile’s Fiscal Institutions before the AFC
• 2000: Minister of Finance adopts a Cyclically-Adjusted (or
Structural) Balance Rule
• Starts in 2001, largely in place to the present (14 years)
• Objetive: government expenditure determined by estimate of
permanent income, saving cyclical revenue in sovereign
wealth fund.
• Early 2000s: independent committees are established that
present trend GDP growth etimates and long-term copper
price forecasts. Used as MoF inputs for forecasts of cyclicallyadjusted copper price and GDP levels in estimating cyclically
adjusted government revenue
• 2006: Fiscal Responsibility Law: formalizes Structural Fiscal
Balance Rule, requires incoming MoF to present fiscal policy
framework consistent with the latter rule within 3 months,
establishes legally the two independent committees.
Chile’s Fiscal Institutions before the AFC
• 2010: MoF calls Commission to make proposals to
improve fiscal policy framework and fiscal rule.
• 2011 Corbo Commission: refines calculation of
Cyclically-Adjusted Fiscal Balance Rule, proposes
Independent Fiscal Council, other changes. Many
adoped by MoF
• Replication of cyclical adjustments to government
revenue still difficult for independent analysts
Open Budget Transparency Index, 2012
New Zealand
1
South Africa
2
United Kingdom
3
Norway
6
Chile
16
Spain
19
Colombia
28
Argentina
40
Egypt
83
Chad
95
Benin
96
Saudi Arabia
97
0
10
20
30
Source: International Budget Partnership
40
50
60
70
80
90
100
Main Features of Chile’s AFC
• Initiated in May 2013 by Ministry of Finance decree
• Main objective: collaborate in discussion, analysis, and
provision of recommendations to the MoF, in matters
related to application of cyclically-adjusted balance rule
to the budget
• Specific tasks:
a) Participates as observer in Trend GDP and Reference Copper
Price Commitess called upon by the MoF
b) Takes a position about the estimation of the cyclical
adjustment to government revenue and balance preparaed by
the Budget Office
c) Presents its position and makes observations on prospective
changes proposed by teh MoF on the fiscal rule
d) Provides advise on fiscal policy issues, in response to requests
made by the MoF
Main Features of Chile’s AFC
•
•
•
•
•
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AFC pursues a narrow set of tasks
Lacks institutional independence
Lacks staff and budget (members are not paid)
5 members are named for overlapping 4-year periods
Recruited among local fiscal experts
AFC issues minutes and press releases that
summarize meetings and assessments of Budget
Office preparation of budget and related documents
Fiscal Councils in the World
Note: The tasks considered are 1) provide objective analysis of fiscal policy, 2) provide
government independent budget projections, 3) provide evaluations and normative
recommendations about fiscal policy; n.d.: no data
Sources: Calmfors and Wren-Lewis (2011) and Ministry of Finance of Chile
2013-14 Experience of Chile (1)
Council provides independent evaluation of implemention of
complex fiscal rule in the Government’s Budget proposal to
Congress and its execution:
(1) In meetings (July 2013) with independent committees
that provide GDP trend estimates and long-term copper price
forecasts (July 2013)
(2) In sequential meetings (July-October 2013) with Budget
Office Director and staff to discuss:
• Projections of output gaps and LT/current copper projectons – key
for estimations of cyclical components of gov coper and tax
revenue
• Application of tax revenue elasticities
• Other key assumptions for projections of actual and c.a. revenue
and balance estimates
• Draft Report on the State of Public Finances by the MoF
2013-14 Experience of Chile (2)
(3) At presentations at congressional hearings on the budget (not
called upon in 2013)
(4) In sequential meetings (Dec. 2013-March 2014) with Budget
Office Director and staff to discuss:
• Adjustment of 2013 budget execution to meet 2013 c.a. target
balance (-1% of GDP balance)
• Provide comments on 2014 budget execution document
• Discuss and prepare memo on possible changes of fiscal policy rule
submitted to new administration
Summary: external assessment and recommendations
by AFC on Budget Office application of fiscal rule to
budget preparation is technically useful, raises
transparency, and strengthens credibility of Chile’s
fiscal framework
OECD Principles for Fiscal Institutions
The OECD groups 22 principles under 9 broad headings
1.
2.
3.
4.
5.
6.
7.
8.
9.
Local ownership
Independence and non-partisanship
Mandate
Resources
Relationship with the legislature
Access to information
Transparency
Communications
External evaluation
Differences with OECD Standards
Main differences of Chile’s AFC with OECD standards:
3. Narrow mandate – only MoF advisory role
4. Neither budget nor staff
5. Not formally accountable to Congres
Areas of Reform
Proposals put forward by 2011 Corbo Commisson and
2013 election program of current Administration:
• Adopt Independent Fiscal Council by law
• With broad mandate on a wide range of issues to
improve asessment of yearly budegt preparation and
execution, long-term budget projections, estimation
of long-term impact of fiscla policy changes, etc.
• With independent staff and budget
• Accountable to Congress (but independent of
Congress)
Chile’s Advisory Fiscal Council
Klaus Schmidt-Hebbel
President, AFC, Chile
Sixth Annual Meeting of OECD Parliamentary
Budget Officials and Independent Fiscal Institutions
The Knesset, Jerusalem
31 March - 1 April 2014