Prepared by an IMF staff team consisting of Julio Vifluela (head) and Juan Ramon Ruiz, based on a mission that visited Managua during June 24-July 4, 2001.
According to the political constitution of the Republic of Nicaragua (Title VIII, of the Organization of the State), the state is organized in four branches (legislative, judiciary, electoral, and executive). Law 290 dated July 3, 1998 (on the organization, areas of authority, and procedures of the executive branch) states that the executive branch is formed by the president the vice-president, 12 ministries, and governmental entities. Governmental entities may be deconcentrated entities or decentralized entities. Deconcentrated entities have some kind of technical autonomy, while decentralized entities have a higher functional autonomy, financial autonomy, and their own assets. Universities are constitutionally autonomous,
For example, Law 290 includes among the non-commercial decentralized entities, the Central Bank of Nicaragua, the Nicaraguan Institute of Insurance and Reinsurance, and the Nicaraguan Investment Fund, which are PFI. (See paragraphs 6 and 8 below).
The budgeted entities are the national assembly, the supreme court, the electoral council, the office of the comptroller general of the republic, the office of the president of the republic and the ministries.
The annual budget law may not create new taxes, nor modify or eliminate existing ones.
For example, according to article 112 of the constitution, as amended in 1996, the national assembly must approve any increase or decrease of specific line items or transfers of expenditures between institutions. However, Article 32, not yet abolished, of the Budget Regime Law assigns this role to the President of the Republic.
Constitution, Title IX, Political Administrative Division; Law 40 of August 17, 1988, regarding municipalities, modified in 1997; Decree 52 of 1997, approving regulatory provisions of the law on municipalities. A municipal tax code is currently under parliamentary review. Municipal tax revenues are regulated, in a general way, by laws approved by the national assembly, Municipalities set tax rates within the ranges specified in these laws. Local borrowing must be approved by the local council and, when it materializes in issued debt instalments, by the ministry of finance and public credit Debt service cannot exceed 20 percent of current revenues.
The 2001 GBR does not include the budgets of either the universities or of the following decentralized agencies: Emergency Social Investment Fund; Nicaraguan Institute of Rural and Urban Housing; the social insurance funds for the police and the military; Nicaraguan Agriculture and Forestry Institute; and the Nicaraguan Institute for Small and Medium Enterprises.
In the 2001 revenue budget: universities (6.9 percent); supreme court of justice (4.6 percent); customs administration (1.8 percent); internal revenue service (1.8 percent); municipalities (1 percent); and ministries and agencies’ own revenues (4.7 percent).
As of May 31, 2001, the treasury’s debt to the CBN in these categories was US$1.6 billion.
In the year 2000, the water subsidy for household users and settlements was US$6 million, and unbilled water use by universities was US$1.6 million.
These cases involve enterprises nationalized by earlier governments that have been gathered under CORNAP, a holding company in charge of returning them to the former owners or of privatizing them to the employees. Privatizations are approved by the national assembly. The estimated value of the 37 remaining enterprises amounts to some US$100 million.
The constitution, Article 112–115, reformed in 1995, contains certain general fiscal principles. The Budget Regime Law, Law 51–1988 modified in 1991, regulates procedures for preparation, execution, control and evaluation of the budget. The annual budget law, in addition to covering budget revenue and outlay and financing of the deficit, specifies changes in the government’s budget bill approved by the national assembly. A decree by the ministry of finance and public credit, regarding standards for budget execution and control, includes detailed provisions for budget execution, along with general provisions that are repeated each year and would more appropriately be included in the budget regime law or in a budget code. Presidential Decree 44, promulgated in J 998, defines, regulates and determines operational criteria for the integrated financial management and audit system. Presidential Decree 2–93 regulates the formulation, approval, coordination of the execution, control and evaluation of the budgets of the autonomous and decentralized agencies.
The DGPI, which prepares more than 40 percent of the national budget, lacks an explicit legal basis. Its organization and functions are not covered by any sufficiently specific regulation.
A tax code bill awaiting passage in the national assembly will address these problems and has broad support by social agents.
The absence of any compilation of the various tax exemptions, and of an assessment of their impact on tax collections makes it difficult to predict revenues or assess compliance with tax obligations.
Law on the moral integrity of public employees (Decree 39–1979). Code of ethics for the public employees of the executive branch (Decree 124–1999). Criminal Law.
See footnote 8.
Budget allocations for each instimtion are disaggregated by program. For each program infonnation is provided on aggregate current spending and aggregate capital spending, physical goals, and investment projects indicating, in each one, its source of financing: the treasury, foreign donations or foreign loans. Finally, for each institution, spending is broken down into categories similar, but not identical, to economic categories, lines and accounts. Transfers to decentralized entities that are subordinate to the mstitution appear in the category of current transfers.
Nicaragua has not reported to the GFS Yearbook since 1996.
Law 3 76 dated April 4, 2001.
Only predictions at the beginning of the budget year, when the secretariat of foreign cooperation has concluded negotiations and signed protocols with donors, are reliable.
The 2001 budget legislation gives budgeted entities the authority to incorporate in their budgets the unanticipated amount of donations and disbursements of concessional loans earmarked for projects and programs.
Technical assistance agencies themselves sometimes offer loans to executing units, to be repaid during the following fiscal year with treasury funds included in that year’s national budget.
The PIP, which represents 42 percent of budgeted spending in 2001, is financed mostly (62 percent) by foreign grants and concessional loans linked to specific projects. The volume of investment is determined largely by the foreign funds committed, and to a lesser extent by the availability of Treasury funds to cover local counterpart contributions. Distribution of funds, by project, is based more on the priorities of donors and providers of concessional financing than on the government’s policy priorities.
There is a Technical Committee for Investment, which is responsible for approving the PIP. It is composed of representatives from SETEC, the DGB, the Foreign Ministry’s Secretariat of International Coordination, and the CBN. Given the structure of the PIP, SETEC has the greatest responsibility and plays the lead role in program development.
Social services, infrastructure and production, defense and security, general services, and public debt service.
See paragraph 5.
The deadline for recording payments of obligations recognized in the preceding fiscal year is February 15.
Law dated December 2, 1999, reforming Law 323 regarding state contracts, and Decree 21–2000, approving general regulations of the law on state contracts.
The most significant exceptions to the general regime are for army and national police procurement, and for contracting between public entities.
There is a civil service bill in the NA that attempts to fill this gap. With a view to implementing its provisions, the government is updating manuals containing descriptions, analyses and assessments of jobs within the ministries. In addition, it is compiling and reviewing government employee records.
Seventy percent of the 78,000 government employees receive monthly salaries of less than US$70.
Executing agencies for projects have incentives to provide timely information on expenditures made in projects financed with treasury funds so as to accelerate payments, but not on expenditures made and paid directly by the project offices of the donor agencies. This creates a lack of reliability in the quarterly budget execution reports prepared by the DGB.
In the period 1992–1995, the executed budget was on average 25 percent higher than the initial budget against an average of 5 percent in 1996–2000.
In the year 2000, the final amount budgeted for spending was 17 percent greater than the initial figure. Actual spending exceeded the initial budgeted figure by 5 percent, but represented only 90 percent of the modified figure budgeted for spending. In five ministries, spending increases were higher than 20 percent.
In particular, this list should draw a clear boundary between the commercial and non-commercial decentralized and autonomous entities.