Nicaragua : Public Expenditure Review 2001-2006
Nicaragua has made impressive progress since 2001 in reducing the overall fiscal deficit. A series of internal and external shocks (hurricane Mitch, banking crisis, elections) reopened major fiscal gaps at the end of the 1990s, which threatened to...
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| Language: | English |
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Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2008/03/9701111/nicaragua-public-expenditure-review-2001-2006 http://hdl.handle.net/10986/8090 |
| Summary: | Nicaragua has made impressive progress
since 2001 in reducing the overall fiscal deficit. A series
of internal and external shocks (hurricane Mitch, banking
crisis, elections) reopened major fiscal gaps at the end of
the 1990s, which threatened to destabilize the economy.
Since then, fiscal management has remained prudent in spite
of spending pressures, resulting in an improvement of the
combined public sector balance (after grants) from a deficit
of 5.4 percent of Gross Domestic Product (GDP) in 2002 to a
surplus of 0.2 percent in 2006. The Public Expenditure
Review (PER) has assessed Nicaragua's Public Financial
Management (PFM) performance, using an international
framework of reference that addresses seven critical
dimensions: (i) credibility of the budget; (ii)
comprehensiveness and transparency; (iii) budget planning;
(iv) predictability and control in budget execution; (v)
accounting, recording, and reporting; (vi) external scrutiny
and audit; and (vii) donor practices that affect PFM. The
assessment reveals that significant progress has been made
since January 2004 in the implementation of the 2003 Country
Financial Accountability Assessment (CFAA) Action Plan, but
that some areas require further attention. Based on that
assessment, the following measures are considered critical
for scaling up ongoing efforts to reform and modernize
public financial management (PFM). Nicaragua has come a long
way since the beginning of this decade in bringing its
overall fiscal balances under control. This puts Nicaragua
in a good position for combating poverty in a sustained
manner. To maintain that position, however, it will need to
overcome further challenges that threaten to undermine
fiscal stability in the medium term, notably a rapidly
growing public wage bill and fiscal transfers to the
municipalities. Looking beyond macroeconomic stability,
Nicaragua also needs to pick up the pace of economic growth
in order to generate greater momentum in poverty reduction.
In this regard, the PER has identified various options for
improving the quality of public expenditures in key areas
relevant for economic growth. It also pointed out the most
important measures needed to modernize public expenditure
management and, thereby, facilitate the adjustments needed
to improve the quality of public spending in a
cost-effective manner. It is hoped that these insights prove
useful to the authorities in their efforts to promote faster
growth and poverty reduction in Nicaragua. |
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