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Programa de Cooperación al Desarrollo Económico Secretaría de Estado para Asuntos Económicos – SECO

Peru’s Experience with PEFA at the Sub-national level

25 abril de 2012

Since the deepening of the process of decentralization in 2002, public services are increasingly provided to the population through subnational governments (around 40% of total public expenditure). Sub-national government (regional and local) income has increased five-fold between 2002 and 2010 (tax on extractive industries very important). PFM systems at regional level government appear to be weaker than at central government (PEFA evaluations in three regions, 2011). Success with PFM reforms at sub-national level require changes to the legal and procedural framework established at the national level (capacity building and IT infrastructure also important).

Post PEFA Reform Scenario
PEFA Peru 2009 Central Government National PFM Reform Programme 2011-15
PEFA Peru Central Government (Repeat Assessment 2013)

Integrated Reform
Subnational PFM Programme 2012-2016 Regional Plans of Action
Municipal Plans of Action

PEFA Regional Governments of San Martin, Apurímac and Cusco (pilot 2011)

PEFA Municipal Governments of Chiclayo, Cusco and another (2012)

Preliminary Conclusions
PEFA is becoming a common platform for PFM analysis and policy dialogue between national, regional and local government officials, as well as the donor community. The experience accumulated from the 3 regional level PEFA evaluations shows that it is important to include sub-national levels of government to the PFM reform effort. Integrated Approach: The Swiss Cooperation – SECO supports the preparation and implementation of sub-national level Action Plans, facilitated through a process of Peer Learning and the establishment of PFM coordination channels for all three tiers of government.

Regional Government of San Martin
San Martín, is located in the Peruvian jungle and its economy has grown consistently between 2001 and 2009 at a higher rate than the national average. Poverty rates have fallen from 66.9% in 2001 to 31.3% in 2010. It does not receive significant levels of income from taxes on extractive industries (in contrast to the other two PEFA regions). It is a policy of the Regional Government of San Martin to ensure that the region’s growth process is sustainable. PFM good practices is central to this endevour.

The PEFA Experience
The PEFA evaluation took place at the end of 2011. It was the third of 3 PEFA evaluations undertaken as an input for the development of a Subnational PFM Strengthening Programme. One important conclusion of the PEFA report suggests that aggregate fiscal discipline is sound. The report also reveals that there are important challenges to be addressed to improve budget credibility and internal and external audits.

Post PEFA Expectations

The Regional Government of San Martin has already acted on the PEFA evaluation and its main findings by hiring the services of national experts to design and develop a plan of action for the implementation of a new internal control system. It is also undertaking, with domestic resources, the a process of accounting consolidation.

The preparation of an integrated plan of action on the basis of the results of the PEFA evaluation.

Thank you for attention.