World Bank2012-06-142012-06-142008-03https://hdl.handle.net/10986/8090Nicaragua has made impressive progress since 2001 in reducing the overall fiscal deficit. A series of internal and external shocks (hurricane Mitch, banking crisis, elections) reopened major fiscal gaps at the end of the 1990s, which threatened to destabilize the economy. Since then, fiscal management has remained prudent in spite of spending pressures, resulting in an improvement of the combined public sector balance (after grants) from a deficit of 5.4 percent of Gross Domestic Product (GDP) in 2002 to a surplus of 0.2 percent in 2006. The Public Expenditure Review (PER) has assessed Nicaragua's Public Financial Management (PFM) performance, using an international framework of reference that addresses seven critical dimensions: (i) credibility of the budget; (ii) comprehensiveness and transparency; (iii) budget planning; (iv) predictability and control in budget execution; (v) accounting, recording, and reporting; (vi) external scrutiny and audit; and (vii) donor practices that affect PFM. The assessment reveals that significant progress has been made since January 2004 in the implementation of the 2003 Country Financial Accountability Assessment (CFAA) Action Plan, but that some areas require further attention. Based on that assessment, the following measures are considered critical for scaling up ongoing efforts to reform and modernize public financial management (PFM). Nicaragua has come a long way since the beginning of this decade in bringing its overall fiscal balances under control. This puts Nicaragua in a good position for combating poverty in a sustained manner. To maintain that position, however, it will need to overcome further challenges that threaten to undermine fiscal stability in the medium term, notably a rapidly growing public wage bill and fiscal transfers to the municipalities. Looking beyond macroeconomic stability, Nicaragua also needs to pick up the pace of economic growth in order to generate greater momentum in poverty reduction. In this regard, the PER has identified various options for improving the quality of public expenditures in key areas relevant for economic growth. It also pointed out the most important measures needed to modernize public expenditure management and, thereby, facilitate the adjustments needed to improve the quality of public spending in a cost-effective manner. It is hoped that these insights prove useful to the authorities in their efforts to promote faster growth and poverty reduction in Nicaragua.CC BY 3.0 IGOACCOUNTABILITYACCOUNTABILITY FRAMEWORKACCOUNTINGACCRUAL ACCOUNTINGAGGREGATE DEMANDAGGREGATE FISCALALLOCATIONANNUAL BUDGETANNUAL BUDGET FORMULATIONANNUAL RATEARTICLEBENEFICIARIESBUDGET ALLOCATIONBUDGET ALLOCATION RULESBUDGET ALLOCATIONSBUDGET EXECUTIONBUDGET FORMULATION PROCESSBUDGET FRAMEWORKBUDGET PLANNINGBUDGET SUPPORTBUDGET SUPPORT OPERATIONSBUDGET TRANSFERSCAPITAL EXPENDITURESCAPITAL INVESTMENTCAPITAL SPENDINGCENTRAL BANKCENTRAL GOVERNMENTCENTRAL GOVERNMENT EMPLOYMENTCENTRAL GOVERNMENT SPENDINGCIVIL SOCIETY ORGANIZATIONSCOST RECOVERYDEBTDEBT BURDENDEBT RELIEFDEBT SERVICEDEBT SUSTAINABILITYDECENTRALIZATIONDECENTRALIZATION PROCESSDECENTRALIZATION STRATEGYDOMESTIC DEBTDONOR AGENCIESDONOR COORDINATIONECONOMIC GROWTHEDUCATION PROGRAMEDUCATION SERVICESEFFICIENCY GAINSEFFICIENCY OF PUBLIC SPENDINGEXPENDITURE BUDGETEXPENDITURE COMMITMENTSEXPENDITURE CUTSEXPENDITURE PLANNINGEXPENDITURE RESPONSIBILITIESEXPENDITURESEXTERNAL AUDITEXTERNAL DEBTEXTERNAL SHOCKSFINANCE MINISTRYFINANCIAL RELATIONSFINANCIAL STATEMENTSFISCAL ADJUSTMENTFISCAL ADJUSTMENTSFISCAL BALANCEFISCAL CAPACITYFISCAL CONSEQUENCESFISCAL CONSTRAINTSFISCAL CONTROLFISCAL DECENTRALIZATIONFISCAL DEFICITFISCAL DISCIPLINEFISCAL FRAMEWORKFISCAL IMBALANCEFISCAL IMBALANCESFISCAL IMPACTFISCAL INFORMATIONFISCAL MANAGEMENTFISCAL POLICYFISCAL PRESSURESFISCAL PROBLEMSFISCAL REVENUEFISCAL RISKFISCAL SAVINGSFISCAL STABILITYFISCAL SUSTAINABILITYFISCAL TARGETFISCAL TRANSFERSGOVERNMENT EXPENDITURESGOVERNMENT REVENUESGROSS FIXED CAPITAL FORMATIONGROWTH OF PUBLIC SPENDINGGROWTH RATEHEALTH CAREHEALTH CENTERSHEALTH EXPENDITURESHEALTH OUTCOMESHEALTH POLICYHEALTH SECTORHEALTH SERVICESHEALTH SPENDINGHEALTH WORKERSINDIRECT COSTSINFLATIONINFLATION RATEINFRASTRUCTURE DEVELOPMENTINFRASTRUCTURE SECTORINTERNAL AUDITINTERNAL AUDIT CAPACITYINTERNAL CONTROLMACROECONOMIC ANALYSISMACROECONOMIC INDICATORSMACROECONOMIC POLICIESMACROECONOMIC STABILITYMARGINAL COSTMARGINAL COSTSMARKET FORCESMEDIUM TERM EXPENDITUREMEDIUM TERM EXPENDITURE FRAMEWORKMULTILATERAL DONORSMUNICIPAL GOVERNMENTSMUNICIPAL RESPONSIBILITIESMUNICIPALITIESNATIONAL DEVELOPMENTNATIONAL DEVELOPMENT PLANNATIONAL INCOMENET PRESENT VALUEPENSION LIABILITIESPENSION REFORMPERFORMANCE ASSESSMENTPERFORMANCE ORIENTATIONPERSONNEL MANAGEMENTPOVERTY ASSESSMENTPOVERTY INDICATORSPOVERTY REDUCINGPOVERTY REDUCTIONPOVERTY REDUCTION STRATEGYPOVERTY REDUCTION SUPPORTPRIVATE INVESTMENTPRIVATE SAVINGSPRIVATE SECTORPROCUREMENT DATAPROGRAMSPUBLIC CONSUMPTIONPUBLIC DEBTPUBLIC EMPLOYMENTPUBLIC ENTERPRISESPUBLIC EXPENDITUREPUBLIC EXPENDITURE MANAGEMENTPUBLIC EXPENDITURE REVIEWPUBLIC EXPENDITURESPUBLIC FINANCEPUBLIC FINANCESPUBLIC FINANCIAL MANAGEMENTPUBLIC FUNDSPUBLIC HEALTHPUBLIC INFRASTRUCTUREPUBLIC INVESTMENTPUBLIC PROCUREMENTPUBLIC RESOURCESPUBLIC REVENUESPUBLIC SECTORPUBLIC SECTOR BUDGETPUBLIC SECTOR DEFICITPUBLIC SECTOR EMPLOYEESPUBLIC SECTOR EMPLOYMENTPUBLIC SECTOR MANAGEMENTPUBLIC SECTOR SPENDINGPUBLIC SERVICESPUBLIC SPENDINGQUALITY OF PUBLIC SPENDINGREFORM ACTIONSREFORM PROCESSREGULATORY FRAMEWORKREGULATORY SYSTEMSRESOURCE ALLOCATIONRESOURCE MANAGEMENTREVENUE GROWTHREVENUE INCREASESROAD MAINTENANCESANITATIONSECTOR EXPENDITURESERVICE DELIVERYSERVICE QUALITYSOCIAL EXPENDITURESSOCIAL INDICATORSSOCIAL PROTECTIONSOCIAL SECURITYSTRATEGIC PLANSSTRUCTURAL REFORMSSUSTAINABILITY ANALYSISTAX ADMINISTRATIONTAX COLLECTIONTAX REVENUESTOTAL PUBLIC EXPENDITURETRANSPARENCYUNCERTAINTYWAGE POLICYWorld Bank10.1596/8090