Latin American governments urged to improve PFM

20 Jun 14
Latin American and Caribbean governments have been urged to do more to improve their public financial management and procurement practices to catch up with advanced economies.

By | 20 June 2014

Latin American and Caribbean governments have been urged to do more to improve their public financial management and procurement practices to catch up with advanced economies.

In a joint report launched in Mexico City today, the Organization for Economic Cooperation and Development and the Inter-American Development Bank found around half of the 17 countries examined had introduced budget tools such as fiscal rules or stabilisation funds to add a layer of protection during the global economic crisis.

However, the Government at a glance: Latin America and the Caribbean report found more could be done to improve budget management, tax collection and public sector pay equality, which would to raise living standards, strengthen public services and protect against future economic shocks.

‘Good government practices are critical for economic development, resilience and overall wellbeing,’ said Edwin Lau, head of public sector reform at the OECD.

‘This shows us exactly where Latin American and Caribbean governments have made progress and where there is still work to do.’

Gustavo Garcia, principal fiscal economist at the IDB’s fiscal and municipal management division, added: ‘While the region has made important innovations in public financial management in the last decade, such as the adoption of performance-based budgeting, governments must still focus on generating fiscal space to increase much-needed expenditures in poverty reduction programmes, basic infrastructure and mitigation of economic shocks.’

The report went on to note that Latin American and Caribbean countries tend to have smaller public sectors, with public employment accounting for 10.7% of the labour forced compared with an OECD average of 15.3%. Public sector workers also earn less than they would in advanced economies, and wide pay gaps means that senior managers earn 6.7 times what secretaries earns, compared with 4.6 times in the OECD area.

Government revenues equal 25.6% of gross domestic product versus an OECD average of 41.9%, and spending averages 27.8% of GDP versus 45.2% in OECD countries.

Although countries in Latin American and the Caribbean have smaller governments and younger institutions than more economically advanced nations, the report noted their citizens are increasingly demanding the same standards in public services, infrastructure and living standards.

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