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How is Chile’s fiscal budget prepared?

The fiscal budget is the result of a thorough process of analysis, formulation, enquiry, discussion and approval that is executed by diverse players and institutions. In order to ensure financial and economic consistency, since 2000 this process has been carried out according to a rule that requires generating a structural surplus equal to 0% of the Gross Domestic Product (GDP).

The structural surplus rule means that the government considers its long-term sustainable revenues in making decisions on spending, avoiding commitments that are based on transitory revenue peaks, such as when the price of copper is high or when the economy overheats. In order for this practice to be as transparent as possible, a commission of external experts is consulted on long-term copper prices and on the economy’s potential production level. These factors are included in government estimates and allow it to determine the compatibility of expenditures with the structural surplus rule.

The budgeting process begins in April when government officials and authorities, external experts and members of Congress begin analyzing data to prepare the budget for the following year. At the same time the Ministry of Finance evaluates the results and performance of programs and public institutions included in the previous year’s budget.

This information is used to define an initial budgetary framework that includes expenses to meet legal or contractual requirements, and continued spending on successfully evaluated programs. Once priorities have been considered, the public institutions design and submit proposals to the Ministry of Finance intended to expand successful programs or create new ones, which must apply for a common biddable fund. After a comprehensive process of technical analysis and discussion conducted by the Ministry of Finance and MIDEPLAN, the president of the republic reviews and defines a budget project for each public institution.

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