The COVID-19 pandemic has posed challenges that have no precedent in recent history, forcing governments to act boldly, in a very short period. The public health crisis has prompted a parallel socio-economic crisis, imposing enormous logistical demands, requiring decisive economic support for households and companies, and pushing the reorganization of state agencies just when efficient management of public resources is most needed. The challenge is to “build back better”, so that the recovery leaves no one behind. In the words of the Secretary-General of the United Nations, in Latin America, “building back better requires transforming the development model”, to reduce inequality and end poverty.
To face the public health challenges that lie ahead, and to lead recovery efforts, governments need as many financial resources as possible. A recent report by the UNDP’s Regional Bureau for Latin America and the Caribbean highlights that this requires tax regimes and fiscal policies that "guarantee collections that strengthen the capacity of the State to provide quality public services, allowing sustainable, fairer and more inclusive spending that promotes the universality of social protection and is friendly to economic growth."
However, the challenges do not end with increased revenue collection. The scale of the crisis also requires that public funds are efficiently and effectively spent. This means organizing public spending that takes into account the needs of people. This requires from governments both the capacity to listen to its citizens, and to constantly monitor and evaluate its own actions. Transparency and public involvement in the formulation of budgets and on overseeing spending are key to increase public trust in government. In short, building back better is also spending better.
In Chile, the pandemic hit the country as the country was addressing a socio-economic crisis triggered in October 2019. Massive demonstrations had clearly expressed public demands to address the country’s inequalities. Politicians reacted by proposing a constitutional replacement itinerary, overwhelmingly endorsed by voters in a plebiscite.
In January 2020 the Minister of Finance convened a Ministerial Advisory Commission to improve the transparency, quality, and impact of public spending. The group was formally set up in January and was asked to work for one year. The COVID-19 pandemic, which arrived in mid-March, gave new meaning and urgency to the commission’s mandate, but it did not change its two main goals; to facilitate and promote greater public involvement in the different phases of the budgetary process, and a more citizen-centered accountability; and to improve efficiency in the use of public resources, based on high-quality data.
The commission was comprised of 16 members. UNDP was the only institution invited, all other members participated in an individual capacity. They came from think tanks, NGOs and universities. It included former Finance Ministry and Budget Office authorities, former congressmen, and a former education minister.
The commission has made a series of proposals. It was proposed for the Finance Ministry, along with the Chilean Internal Revenue Service, to provide taxpayers with information about the ways their taxes were spent in 2019. The minister agreed with the recommendation and, as a result, more than three million reports were sent out to the taxpayers in 2020. An experimental design associated with the rollout showed that receiving this information significantly increased taxpayers’ trust in government, and their perceptions of transparency.
Other recommendations focused on the transparency of information and the audit of public spending in the context of the public health crisis, the management of funds associated with an emergency plan for the protection of income of the families, and economic and employment recovery.
In its final report, delivered to the Minister of Finance in a ceremony in January 2021, the commission made 35 proposals, organized in six priority areas. Each one of them outlines structural changes that, if implemented, will allow the country to design a better budget process. The six areas are: (1) organize the annual state budget around explicit, long-term goals, setting up metrics associated with each goal, and harmonizing the evaluation tools used by different public institutions; (2) to better prioritize public resources, through a redesign of the budgetary discussion process in Congress; (3) create a monitoring and evaluation system for public spending, that is internally consistent and is explicitly linked to the budget process; (4) increase fiscal transparency, improving the availability of information for individual and institutional actors; (5) establish formal, explicit and systematic mechanisms to include public participation in every stage of the budget process; and (6) develop new policies to increase public knowledge and understanding of government finances.
Building back better requires, among other things, for governments to spend better. This is a necessary condition to help those who need it most. Chile is moving in that direction. UNDP Chile, has been invited to be part of a group of experts to propose innovative means to support the state response. This is testament to the trust our counterparts put in UNDP as a strategic partner in building stronger institutions, and a more sustainable future, in line with the aspirations of the 2030 Agenda.