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Mexico Must Remain Committed to Public Finance Reform
 OECD
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January 08, 2010
Recent reforms have improved Mexico’s overall budget framework, helping it to withstand the current global crisis, but further reforms are needed to ensure long-term fiscal sustainability, according to a new OECD study.
The OECD welcomes the announcement that Minister of Finance Ernesto Cordero plans to introduce a major fiscal reform initiative this year.
The OECD Review of Budgeting in Mexico compares Mexican budgetary processes and institutions with those of other countries as a basis for signalling opportunities for reform. Since 2006, it notes, the Mexican government has introduced a number of laws to improve fiscal responsibility and transparency.
But legislation is just a first step. Strong and continued support is needed at all political levels – federal, state and local - to ensure that these laws are implemented and used to promote real change, the OECD review said.
“The crisis does not mean that it is time for putting the brakes on reform,” OECD Secretary-General Angel Gurria said. “Rather, it is a time to speed up and push forward with important reform initiatives.” ( Full speech available here).
To achieve sustainable public finances in the longer term, Mexico needs to reduce the budget’s dependency on oil revenues and improve its overall economic growth rate. It also needs to improve the efficiency and effectiveness of public spending and the accountability of spending at the sub-national level. Outlining possible reforms, the OECD suggests that Mexico should:
• Develop a longer-term focus for the budget: In place of the current process which focuses only on one year, a medium-term framework that looks at expenditure over three years and aligns funding with the government’s plans and goals for different sectors would improve stability and assist planning. Longer-term estimates of expenditure (20 to 30 years) allow planing for issues such as declining oil revenues and changing demographics.
• Routinely include performance results in the budget formulation process: Increasing the use of performance information in budget processes is an important initiative and part of an ongoing process that seeks to move the focus of decision-making in budgeting away from inputs (How much money can I get?) towards measurable results (What can I achieve with this money?).
• Engage Congress in budget discussions: Members should be encouraged to use evaluations and information on results presented by the executive to follow up the performance of relevant ministries and agencies and for discussion of the draft budget.
• Encourage the public sector to focus on results: New incentive structures should encourage agencies and public servants to focus on performance. Internal rules and regulations should be streamlined and increased flexibility should be introduced for budget execution and management and personnel issues. |
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