The Fiscal Advisory Council of Uruguay (CFA) –created by law within the framework of the new fiscal institutional framework– and convened by the Ministry of Economy and Finance (MEF), published this Tuesday its first evaluation report corresponding to 2021, as well as a series of suggestions.
The CFA is a technical, honorary, and independent body whose objectives are to provide greater transparency in the management of fiscal policy, as well as ensuring the sustainability of public finances. Its members are the economists Alfonso Capurro, Aldo Lema and Ana Fostel.
According to the document, “a positive assessment was made of compliance with the indicative goal of the Structural Fiscal Result (RFE)” for 2021 stipulated in the Message and Statement of Reasons of the 2020 Accountability Law.
In addition, he stressed the importance of having convened for the first time the Committee of Expertsas a way to have the relevant inputs for the calculation of potential GDP, and “give a new impetus to the treatment and discussion of issues related to long-term growth in Uruguay”, a “necessary discussion to improve the quality of policies and for the best evaluation of public and private investment projects”, says the report.
The Committee of Experts was in charge of sending the MEF the projections made to determine theThe long-term annual growth rate of the economy, which was estimated at 2.1% for the period 2021-2030. This rate is what sets the ceiling for the annual growth of primary spending, that is, before interest, another of the pillars of the fiscal rule along with the variation in net debt.
The CFA also recognized the advances in the new institutional framework in terms of transparency, and highlighted the importance of having a public methodology for measuring the EFR as an estimate of the structural fiscal position, “a relevant input to carry out effective management fiscally responsible and sustainable.
Recommendations and suggestions
In addition, within the framework of its attributions, the CFA proposed a series of recommendations on the operation of the Committee of Experts whose objective is “add more actors in this processminimize barriers to entry for new members of the committee, improve the interpretation of the differences between the answers of the experts, and move towards a greater degree of methodological homogenization among the experts”, as explained.
Today the Committee is made up of the Center for Studies of Economic and Social Reality (Ceres), CPA Ferrere, Exante, Grant Thornton, Universidad ORT Uruguay, PricewaterhouseCoopers (PwC Uruguay), Center for Development Studies (CED), Institute of Economics of the Faculty of Economic Sciences and Administration (FCEA-Iecon), Catholic University of Uruguay (UCU), KPMG and University of Montevideo (UM)
In another order, the CFA considered that the current methodological framework for calculating potential GDP, the product gap and the EFR “is aligned with international standards on the matter and constitutes a good starting point for estimating the structural fiscal position ”. Nevertheless, the CFA understands that the proper functioning of the new institutional framework requires progressive progress in a continuous process of methodological improvements. Read the full report here
