194
Beyond the Annual Budget
and broken down by capital and current expenditure. While the PPA coexists with other planning instruments developed by spending agencies, the link between these instruments is not straightforward. The PPA is evaluated and amended annually following approval of the annual budget, and changes can be made to both the PPA and the annual budget during the year. The executive can do this within certain limits (unless there is additional revenue), beyond which legislative approval is required. Brazil appropriates the budget on an expenditure authorization basis, and during budget execution the financial management system puts limits on agency commitments (empenho) and on cash payments (pagamento). At the end of each fiscal year, expenditures that have been committed but not yet paid may be carried over into the following year (restos a pagar). Residual expenditures carried forward are significant, particularly as a component of discretionary spending, and have increased rapidly as the budget has expanded in recent years.
Implementation The macro-fiscal framework is prepared jointly by the MoF, the Ministry of Planning and Budget, and the chief of staff of the Presidency (Casa Civil). These same entities are responsible for agreeing on the revenue estimates that will be used for the budget process. Although the annual revenue estimates are accurate, the medium-term estimates are less so. The parameters for estimating revenue may be changed from the time that the LDO is submitted to the time that the budget proposal is presented; as a result, the estimates for year one of the LDO might change only six months after being approved by congress. The LDO provides budget execution information for the previous two fiscal years as well as fiscal targets, risks, and projections for the following two years in terms of primary balances, debt stock, and revenue and expenditure aggregates. All of this information is published on the website of the Ministry of Planning and Budget. The PPA defines the overall government strategy as well as all programs and actions to be implemented in the period. However, it has lost much of its strategic content and has become an additional procedure in the budget process. The “government strategy” seems to be loosely defined and not properly costed. Nonetheless, the PPA highlights the government’s political priorities—about one-quarter of the programs are designated as “priority,” which means that they are protected from cuts during budget implementation. The LDO ensures this special treatment, which protects priority programs. An important caveat is that, despite the