2002年-世界发展银行全球_Republic_of_Latvia___Public_Expenditure_Review_125页_8mb

Summary of the Public Expenditure Review for the Republic of Latvia

Core Content

This report, titled Public Expenditure Review (PER), provides an in-depth analysis of Latvia's public expenditure management practices and outlines recommendations for improving fiscal discipline, transparency, and efficiency. It was prepared by the World Bank in February 2002, following a 12-month participatory review process involving the Government, the European Commission, the IMF, and World Bank staff.

The report is structured into seven main chapters, with a focus on the challenges and opportunities in public expenditure management, particularly in the context of Latvia's reform efforts and its pursuit of EU accession.

Main Views and Key Information

1. Budgeting and Expenditure Practices

• Latvia's budget process was traditionally incremental and driven by historical spending patterns, with limited policy discussion at the Cabinet level.
• In 2001, the Government introduced an ambitious medium-term action plan to improve public sector performance, aligning with EU standards.
• A policy paper for 2002–2006 was approved, aiming to build more responsive and efficient public institutions.

2. Fiscal Performance

• Latvia's fiscal discipline has generally been strong, with the fiscal deficit decreasing from 3.7% of GDP in 1995 to 0.8% in 1998.
• However, the deficit increased again in 1999 and 2000 due to the Russian crisis and other factors, but improved to 1.7% of GDP in 2001.
• The Government has maintained fiscal stability through strong input controls and a well-developed Treasury system.

3. Budget Process and Structure

• The budget process is open and based on a macroeconomic framework, with reliable revenue and expenditure estimates.
• The Law on Budget and Financial Management provides a clear mandate to the Ministry of Finance and outlines requirements for long-term planning and performance budgeting.
• The budget is divided into four parts: Central Government Basic Budget, Central Government Special Budgets, Local Government Basic Budget, and Local Government Special Budgets.
• Special budgets are funded through block grants, earmarked revenues, own revenues, foreign financing, and net borrowing from the basic budget.

4. Medium-Term Expenditure Framework (MTEF)

• The Government is moving towards implementing an MTEF, which is considered a key reform to improve public expenditure management.
• An MTEF requires a clear understanding of all incentives, and its success depends on commitment from all stakeholders.
• The MTEF involves a new balance of power between line ministries, the Ministry of Finance, and the Chancellery.
• The Cabinet needs to take a more active role in setting priorities and determining the budget process.

5. Challenges in Public Expenditure Management

• The budget process is hampered by structural rigidities, such as limited fungibility of funds, extensive earmarking (45% of revenues), and the proliferation of autonomous agencies (208 in 2000).
• There is a lack of clearly defined policy priorities, leading to unfunded mandates and inefficiencies in budget formulation.
• Cash rationing and arrears have become a growing issue, especially in the health sector, where arrears reached 12% of the health budget in 2000.
• The economic composition of the budget is unbalanced, with high subsidies and transfers (over 60% of central government expenditure in 2001) and low investment compared to regional averages.

6. Areas for Improvement

• Policy Priorities and Fungibility: The Government needs to define clear policy priorities and improve the fungibility of the budget, such as by reviewing earmarking practices.
• Arrears Management: Immediate action is required to eliminate existing arrears and prevent the creation of new ones.
• Performance Budgeting: Strengthening performance budgeting and aligning it with strategic planning is essential.
• Transparency and Accountability: Enhancing transparency and accountability mechanisms, including the role of the Parliament in the audit cycle, is necessary.
• Internal and External Controls: Both internal and external audit systems need to be strengthened, with increased capacity and follow-up mechanisms.

7. Recommendations

• Develop a proper methodology for policy prioritization.
• Increase the fungibility of the budget by reducing earmarking.
• Implement "funded only" policies during the budget preparation process.
• Address the issue of arrears and develop measures to prevent further accumulation.
• Strengthen the capacity of the State Audit Office (SAO) to fulfill its mandates.
• Establish a Public Accounts Committee (PAC) to review SAO reports and enhance accountability.
• Improve the transparency of the budget process and ensure public access to audit findings.

Conclusion

The report highlights that while Latvia has made progress in fiscal discipline and transparency, significant challenges remain in public expenditure management. These include structural rigidities, lack of policy clarity, and the need for better coordination between central and local government. The Government is advised to focus on improving the budget process, enhancing performance budgeting, and strengthening accountability and transparency mechanisms to support its long-term goals of EU accession and effective public administration.