## sipea2025128

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### Introduction and motivation
- Guatemala faces one of the lowest public spending levels among developing economies.
- Combined spending on education, health, and social assistance remained below 6 percent of GDP in 2024.
- Capital spending reached just 2.4 percent of GDP in 2024.
- General government expenditure was 14.6 percent of GDP in 2024; revenues were barely above 12 percent.
- Over the past decade: education between 3.0 and 3.5 percent of GDP; health between 2 and 2.5 percent of GDP; social assistance around 0.5 percent of GDP (except tripling during the COVID-19 pandemic).
- Public investment averaged 2.4 percent of GDP.
- General Government Policy (PGG) 2024-28 priorities: expand coverage and quality in education and health; reduce chronic malnutrition; invest in rural infrastructure; develop a coherent social protection approach.
- Efficiency frontier finding: Guatemala falls significantly below the efficiency frontier in health, education, social assistance, and infrastructure, underperforming in healthy life expectancy, years of schooling, poverty reduction, and infrastructure access.
- Key question: If spending increases gradually through 2029 or 2032, how could it be used to move closer to the efficiency frontier?

### Education: adequacy, outcomes, and policy directions
- Public education spending has hovered around 3 percent of GDP over the past two decades.
- Estimated 1.7 million secondary school–aged adolescents remain outside the education system.
- Net secondary enrolment is less than 40 percent.
- Tertiary enrolment has tripled despite limited improvements in upper-secondary completion.
- Constitutional mandate: at least 5 percent of ordinary revenues allocated to the University of San Carlos, constraining discretionary budgeting.
- Budget structure: heavily concentrated in primary education; secondary education structurally underfunded.
- Primary enrolment near universal; secondary enrolment stagnant since 2010 with high dropout rates.
- Lower performance on PISA and lower adult literacy rates relative to peers.
- Distributional disparities:
  - Less than half aged 12-15 attend lower secondary (basico).
  - Fewer than one in three aged 15-18 continue to upper secondary (diversificado).
  - Public spending on secondary mainly benefits students from wealthier households.
- Government measures: school construction and rehabilitation, expansion of early childhood care, nationwide maintenance program, creation of regional technical institutes—initiatives early stage and limited in scale.
- Recommended policy directions:
  - Reprioritize spending toward secondary retention and underserved students.
  - Scale up scholarships, transport subsidies, teacher deployment, infrastructure maintenance.
  - Improve information systems and assess infrastructure gaps to guide targeting.

### Healthcare: outcomes, financing, and priorities
- UHC index: 50 in 2005, 58 in 2010, 59 in 2021.
- Life expectancy has increased and is at a level expected for Guatemala’s GDP per capita.
- Births attended by skilled staff increased since 2005 but fell temporarily during the pandemic.
- Stunting rates have seen only modest decreases over 20 years.
- Public general government health spending was 2.4 percent of GDP in 2022.
- Central America average health spending: 4.2 percent of GDP; EMEs average: 3.6 percent of GDP.
- Household out-of-pocket spending is 4.9 percent of GDP.
- Pharmaceuticals: highly concentrated market, high prices, uneven public availability; reforms include centralized procurement through MSPAS and expansion of farmacias populares (PROAM) but implementation is early and market concentration remains a barrier.
- Service delivery and PHC allocations:
  - The 2025 MSPAS budget allocates around one-fourth of resources to the Redes Integradas de Servicios de Salud (RISS).
  - Estimated Guatemala spending allocates around 0.6 percent to PHC (below WHO’s recommended 1 percent).
  - RISS budget uneven across departments: Alta Verapaz Q162 per capita; national average Q213 per capita; Santa Rosa Q444 per capita.
  - Hospitals absorb over 40 percent of the health budget; one-third of hospital budget goes exclusively to Roosevelt and San Juan de Dios.
- Recommended policy directions:
  - Strengthen primary care and prevention to reduce avoidable deaths.
  - Improve procurement and medicine availability (centralized procurement and PROAM implementation).
  - Address territorial inequalities by better staffing, equipping, and financing primary health centers.

### Social assistance: coverage, adequacy, and reform prospects
- Social assistance spending is 0.6 percent of GDP.
- This is roughly one-third of the LAC average and one-quarter of that of EMEs.
- Social assistance reduces poverty by less than 5 percent in Guatemala, compared to 35–50 percent in peer countries.
- Only 2-4 percent of households receive conditional cash transfers (CCTs), compared to 10-20 percent regionally.
- As of 2023, about 3 percent of households received support from either Bono or Bolsa Social; departmental coverage ranged from less than 1 percent (Escuintla and Sacatepéquez) to nearly 7 percent (Chiquimula).
- The Adulto Mayor pension reaches 16 percent of poor elderly.
- Programs and targets:
  - Key programs: Bono Social (Q500 monthly) and Bolsa Social (Q250 monthly).
  - By mid-2024, CCT beneficiaries more than doubled; government targets 500,000 by 2027.
  - By mid-2024, over 200,000 households registered in the RSH; goal of 500,000 by 2027, prioritizing 114 high-poverty municipalities.
  - RSH supported inclusion of 24,000 new Bono Social beneficiaries and enabled rapid expansion of Bolsa Social.
- Operational constraints:
  - RSH lacks a formal legal framework, has interoperability issues with RNB, RENAP, MSPAS databases, and limited local implementation and payment delivery capacity.
  - Mano a Mano requires clarification on territorial implementation.
  - Structural constraints—budget rigidity and operational fragmentation—hinder scale-up and targeting effectiveness.

### Infrastructure: investment, coverage gaps, and execution constraints
- Capital allocations in the 2025 budget increased by over 50 percent from 2024 spending, reaching about 3.8 percent of GDP.
- Public investment averaged 2.4 percent of GDP between 2022 and 2024 and is projected to reach 3 percent by 2025-29.
- Estimated required public investment to maximize GDP growth and crowd in private investment: 5-6 percent of GDP.
- Public capital stock amounts to 41 percent of GDP, compared to 60 to 80 percent in similar countries.
- Service coverage shortfalls:
  - Sanitation reaches 50 percent of the population (benchmark in similar economies: 70 percent).
  - Only 20 percent of rural households access drainage networks.
  - Access lags for water, sanitation, and electricity, particularly in rural and indigenous areas.
- Execution and implementation capacity:
  - In 2024, only half of the transport budget and less than 20 percent of the energy budget were executed.
  - Subnational execution rates varied from 49 to 68 percent across departments.
  - Transfers to CODEDEs have not consistently translated into effective service delivery amid political interference and fragmented oversight.
  - PPPs limited by weak regulatory frameworks, heavy bureaucracy, and insufficient public sector capacity.
- Budgetary and planning weaknesses:
  - Planning documents lack prioritized, quantified lists of projects and clear multi-year fiscal envelopes.
  - During budget approval, Congress often introduces new projects; in 2023 Congress added Q499 million in projects, representing 11 percent of the investment projects included in the budget bill presented by the Executive.
  - SEGEPLAN’s monitoring undermined by lack of coordination between SINIP, Guatecompras, and SICOIN.
  - SEGEPLAN data on infrastructure projects add to only around 0.6 percent of GDP, while total capital spending amounts to 2.4 percent of GDP executed public investment.

### Institutional and PFM diagnostics and recommendations
- Structural constraints:
  - Fragmented budget execution across many executing units and overlapping activities.
  - Budget rigidities (constitutional mandates, limited flexibility for reallocation).
  - Weaknesses in planning, execution, and evaluation of spending.
- Results-based budgeting shortcomings:
  - Weakly implemented and fragmented despite adoption over a decade ago.
  - Annual output indicators and targets rarely linked to outcomes or used to assess progress toward PGG priority results.
  - Execution reports often focus on activity levels rather than whether spending closes service gaps.
- Key institutional recommendations:
  - Strengthen coordination between MINFIN, SEGEPLAN, and line ministries to ensure financial viability and alignment of major projects with government priorities.
  - Review and reinforce the results-based budgeting model through clearer responsibilities, better data systems, and consistent use of results information throughout the budget process.
  - Improve interoperability of information systems (SINIP, Guatecompras, SICOIN) to enable real-time project monitoring and adjustments.
  - Institutionalize systematic spending evaluations (value-for-money function in MINFIN/DAPF).

### Planning–budget disconnects, MFMP limits, and reform momentum
- Strategic planning instruments (K’atun 2032, PGG 2024–28, PEIs) exist but strategic objectives are not translated into program-level budget ceilings or systematically aligned with financing needs of vulnerable populations.
- Nutrition allocations to high-need municipalities under the child malnutrition program declined from 31 percent in 2019 to 11.5 percent in 2025.
- MFMP and multiannual budget process often used procedurally; expenditure projections based on baseline adjustments rather than rigorous costing of sectoral strategies.
- MINFIN estimates 93 percent of the 2025 budget is “rigid” (tied to earmarked revenues, legal mandates, or pre-existing commitments).
- 2025 budget includes an extraordinary increase for CODEDEs of around 0.5 percent of GDP, accommodated by reallocating funds away from education, labor, and agriculture.
- Weak results evaluation and monitoring:
  - No institutionalized process to evaluate whether programs achieve intended outcomes.
  - Results monitoring expected only at end of PGG period in 2029, with no intermediate assessments.
  - Partnership signed with J-PAL to evaluate Mano a Mano.
- Recommended critical actions to operationalize PGG and multiyear budget targets for 2026–29:
  - develop an actionable implementation strategy;
  - update baselines and review/sequence expected results for 2026–29;
  - align expected results with realistic expenditure projections;
  - clearly assign responsibilities across ministries and programs;
  - institutionalize a results-oriented budgeting culture anchored in stronger data systems, clearer accountability, and strategic leadership from MINFIN.
- Directorate of Fiscal Policy Analysis (DAPF) identified as well positioned to lead spending-evaluation and value-for-money functions.

### Quantitative scenarios and spending implications
- A gradual reallocation of 2 percentage points of GDP toward priority sectors over the next decade could accelerate progress toward development goals set for 2029 and 2032 and move Guatemala closer to performance frontiers in education, health, and infrastructure.
- Figure 16 illustrative public spending series includes percentages: 6.6%, 6.5%, 1.8%, 2.3%, 0.5%, 0.8%, 3.2%, 4.0%, 2.5%, 3.0% (public spending as a % of GDP by sector/year as presented).

### Conclusion and priority policy measures
- The 2025 budget signals commitment to increasing resources to key development areas such as secondary education and water and sanitation, but adequacy alone is insufficient.
- Persistent gaps between budgeted and executed spending—especially in infrastructure—highlight the need for stronger implementation and monitoring capacity.
- Priority policy measures include:
  - strengthen planning–budget linkages and accountability for results;
  - reconcile technical and political priorities within a credible MFMP;
  - reduce budget rigidities where possible and enhance ex-ante controls on reallocations;
  - institutionalize systematic spending evaluations (value-for-money function in MINFIN/DAPF);
  - update baselines, cost expected results for 2026–29, and sequence program implementation with clear responsibilities.

*Source: sipea2025128 - 2. Efficiency Frontiers for Health, Education, Social Assistance, and Public Investment (July 31, 2025); IMF chapter "Beyond the limitations of results-based budgeting, broader disconnects persist" (Guatemala).*

### 2. Efficiency Frontiers for Health, Education, Social Assistance, and Public Investment __   5

### 2. Efficiency Frontiers for Health, Education, Social Assistance, and Public Investment

### Introduction and Motivation
- Guatemala faces one of the lowest public spending levels among developing economies:
  - Combined spending on education, health, and social assistance remained below 6 percent of GDP in 2024.
  - Capital spending reached just 2.4 percent of GDP in 2024.
- Macro-fiscal context:
  - General government expenditure stood at just 14.6 percent of GDP in 2024, while revenues were barely above 12 percent.
  - Fiscal space is constrained with little prospect of tax reform and rigidities limiting budget reallocation.
- Historical underinvestment and outcomes:
  - Over the past decade: education between 3.0 and 3.5 percent of GDP; health between 2 and 2.5 percent of GDP; social assistance around 0.5 percent of GDP (except tripling during the COVID-19 pandemic).
  - Public investment averaged just 2.4 percent of GDP.
  - Persistent shortfalls have contributed to high rates of stunting, maternal mortality, and school dropout.
- Government strategy and intent:
  - General Government Policy (PGG) 2024-28 priorities include expansion of coverage and quality in education and health, reduction of chronic malnutrition, investments in rural infrastructure, and a more coherent social protection approach.
  - Emphasis on results-based execution, improved planning and prioritization of infrastructure projects, and stronger execution capacity at the local level.
- Efficiency frontier finding:
  - In health, education, social assistance and infrastructure Guatemala falls significantly below the efficiency frontier, underperforming in healthy life expectancy, years of schooling, poverty reduction, and infrastructure access.
  - Question posed: if spending increases gradually through 2029 or 2032, how could it be used to move closer to the efficiency frontier?

### Sectoral Adequacy and Efficiency Gaps — Education
- Key facts:
  - Public education spending has hovered around 3 percent of GDP over the past two decades.
  - Estimated 1.7 million secondary school–aged adolescents remain outside the education system.
  - Net secondary enrolment is less than 40 percent.
  - Tertiary enrolment has tripled despite limited improvements in upper-secondary completion.
  - Constitutional mandate: at least 5 percent of ordinary revenues allocated to the University of San Carlos, constraining discretionary budgeting.
- Outcomes and composition:
  - Budget structure heavily concentrated in primary education; secondary education structurally underfunded.
  - Primary enrolment near universal; secondary enrolment stagnant since 2010 with high dropout rates.
  - Lower performance on PISA and lower adult literacy rates relative to peers.
- Distributional disparities:
  - Adolescents from rural, poor, and indigenous backgrounds are disproportionately excluded:
    - Less than half aged 12-15 attend lower secondary (basico).
    - Fewer than one in three aged 15-18 continue to upper secondary (diversificado).
  - Public spending on secondary mostly benefits students from wealthier households.
- Government measures and gaps:
  - Flagship actions: school construction and rehabilitation, expansion of early childhood care, nationwide maintenance program, creation of regional technical institutes.
  - Implementation status: initiatives are early stage and limited in scale; cost-effective measures (e.g., secondary shifts in primary schools, transportation subsidies) not yet widely rolled out.
- Policy directions highlighted:
  - Reprioritize spending toward secondary retention and underserved students.
  - Scale up promising interventions (scholarships, transport subsidies, teacher deployment, infrastructure maintenance).
  - Improve information systems and assess infrastructure gaps to guide targeting.

### Sectoral Adequacy and Efficiency Gaps — Healthcare
- Key facts and trends:
  - Universal Health Coverage (UHC) index: 50 in 2005, 58 in 2010, 59 in 2021.
  - Life expectancy increased over the last two decades and is currently at a level expected for Guatemala’s GDP per capita.
  - Births attended by skilled staff increased since 2005 but fell temporarily during the pandemic.
  - Stunting rates have only seen modest decreases over 20 years.
- Financing structure and implications:
  - Public general government health spending was 2.4 percent of GDP in 2022.
  - Central America average: 4.2 percent of GDP; EMEs average: 3.6 percent of GDP.
  - Household out-of-pocket spending is 4.9 percent of GDP, contributing to financial risk for households.
  - Pharmaceuticals: highly concentrated market, high prices, and uneven public availability; reforms include centralized procurement through MSPAS and expansion of farmacias populares (PROAM) but implementation is early and market concentration remains a barrier.
- Service delivery and priorities:
  - Priority to expand coverage through the primary healthcare network (RISS), improve infrastructure and human resources, and enhance access to essential medicines.
  - Composition of spending needs strengthening to appropriately staff and equip primary care centers and improve rural service delivery.
- Policy directions highlighted:
  - Strengthen primary care and prevention to reduce avoidable deaths.
  - Improve procurement and medicine availability (centralized procurement and PROAM implementation).
  - Address territorial inequalities by better staffing, equipping, and financing primary health centers.

### Cross-sectoral Findings and Strategic Implications
- The efficiency frontier analysis indicates that modest spending increases, combined with institutional reforms, could yield substantial gains in outcomes across sectors.
- Common bottlenecks constraining results:
  - Fragmented budget execution across many executing units and overlapping activities (notably in health).
  - Budget rigidities (constitutional mandates, limited flexibility for reallocation).
  - Weaknesses in planning, execution, and evaluation of spending.
- Suggested reform pathways:
  - Combine incremental increases in spending with institutional reforms that improve efficiency and equity of service delivery.
  - Use frontiers as reference points for medium-term fiscal framework (MTFP/MFMP) discussions on realistic spending trajectories.
  - Strengthen results-based execution, monitoring, and accountability mechanisms to translate resources into measurable improvements.

*Source: sipea2025128 - 2. Efficiency Frontiers for Health, Education, Social Assistance, and Public Investment (July 31, 2025).*

### 13.      Health outcomes reflect these systemic financing and delivery gaps. The UHC index

### sipea2025128 - 13.      Health outcomes reflect these systemic financing and delivery gaps. The UHC index

### Health outcomes and service delivery gaps
- Key findings:
  - The UHC index remains below the regional average.
  - Healthy life expectancy trails Central America and EMEs by 6-8 years.
  - Maternal mortality is persistently high, with levels 30-50 percent above peer countries.
  - Nearly half of children under five are chronically malnourished.
  - More than one-third of births still occur at home with comadronas.
- Service delivery constraints:
  - Shortage of trained personnel and insufficient infrastructure.
  - Many rural health posts staffed by auxiliary nurses with limited training.
  - Advanced services concentrated in Guatemala City.
  - Gaps are particularly pronounced in rural and indigenous communities, underscoring the need for stronger investment in frontline care and more equitable resource distribution.

### Health financing and primary health care (PHC) allocations
- Budget composition and PHC spending:
  - The 2025 MSPAS budget allocates around one-fourth of resources to the Redes Integradas de Servicios de Salud (RISS).
  - Estimates suggest Guatemala’s spending allocates around 0.6 percent to PHC (below the WHO’s recommended 1 percent).
  - RISS budget is unevenly allocated across departments:
    - Alta Verapaz receives 162 Quetzales per capita.
    - National average is Q213 per capita.
    - Santa Rosa receives Q444 per capita.
  - Hospitals absorb over 40 percent of the health budget, of which a third goes exclusively to Roosevelt and San Juan de Dios.
- Implication:
  - Rebalancing health spending toward prevention, frontline services, and underserved regions is essential to improve equity and cost-effectiveness.

### Social assistance: coverage, adequacy, and reforms
- Current spending and coverage:
  - Social assistance spending is 0.6 percent of GDP.
  - This is roughly one-third of the LAC average and one-quarter of that of EMEs.
  - Social assistance reduces poverty by less than 5 percent in Guatemala, compared to 35–50 percent in peer countries.
  - Only 2-4 percent of households receive conditional cash transfers, compared to 10-20 percent regionally.
  - As of 2023, about 3 percent of households received support from either Bono or Bolsa Social; departmental coverage ranged from less than 1 percent (Escuintla and Sacatepéquez) to nearly 7 percent (Chiquimula).
  - The Adulto Mayor pension reaches just 16 percent of poor elderly.
- Recent institutional developments and targets:
  - The PGG 2024-28 and MIDES institutional plan emphasize expansion of conditional cash transfers (CCTs), institutionalization of the Registro Social de Hogares (RSH), and operationalization of the Mano a Mano strategy.
  - Key programs: Bono Social (Q500 monthly) and Bolsa Social (Q250 monthly).
  - By mid-2024, CCT beneficiaries more than doubled; the government targets 500,000 by 2027.
  - By mid-2024, over 200,000 households had been registered in the RSH, with a goal of reaching 500,000 by 2027, prioritizing 114 high-poverty municipalities.
  - RSH has supported inclusion of 24,000 new Bono Social beneficiaries and enabled rapid expansion of Bolsa Social.
- Operational and institutional constraints:
  - RSH lacks a formal legal framework, faces interoperability issues with RNB, RENAP, MSPAS databases, and is limited by local implementation and payment delivery constraints.
  - Mano a Mano needs further clarification on territorial implementation.
  - Structural constraints—budget rigidity and operational fragmentation—hinder scale-up and targeting effectiveness.

### Infrastructure: investment levels, gaps, and execution
- Recent budgetary and investment figures:
  - Capital allocations in the 2025 budget increased by over 50 percent from 2024 spending, reaching about 3.8 percent of GDP.
  - Public investment averaged just 2.4 percent of GDP between 2022 and 2024 and is projected to reach 3 percent by 2025-29.
  - Estimated required public investment to maximize GDP growth and crowd in private investment is 5-6 percent of GDP.
  - Public capital stock amounts to 41 percent of GDP, compared to 60 to 80 percent in similar countries.
- Service coverage and territorial disparities:
  - Sanitation reaches just half the population, far below the 70 percent benchmark in similar economies.
  - Rural households: only 20 percent accessing drainage networks.
  - Access lags for water, sanitation, and electricity, particularly in rural and indigenous areas.
- Execution and implementation capacity:
  - In 2024, only half of the transport budget and less than 20 percent of the energy budget were executed.
  - Subnational execution rates varied from 49 to 68 percent across departments.
  - Transfers to local development councils (CODEDEs) have not consistently translated into effective service delivery amid political interference and fragmented oversight.
  - Public-private partnerships limited by weak regulatory frameworks, heavy bureaucracy, and insufficient public sector capacity.
- Budgetary process and project planning weaknesses:
  - Planning documents lack a prioritized, quantified list of projects and clear multi-year fiscal envelopes.
  - During budget approval, Congress often introduces new projects; in 2023, Congress added Q499 million in projects, representing 11 percent of the investment projects included in the budget bill presented by the Executive.
  - Mid-year project additions by MICIVI and projects introduced outside SINIP create unfunded commitments and complicate coherent investment strategy.
  - SEGEPLAN’s monitoring is undermined by lack of coordination between SINIP, Guatecompras, and SICOIN, hindering real-time project monitoring.
  - Note: SEGEPLAN data on infrastructure projects add to only around 0.6 percent of GDP, while total capital spending amounts to 2.4 percent of GDP executed public investment.

### Institutional and PFM considerations to improve spending quality and efficiency
- Key diagnostic points:
  - Structural weaknesses in planning, execution, and evaluation constrain the impact of public investment and social spending.
  - Fiscal rigidity and limited governability reduce the government’s leeway to design and implement expenditure policy.
  - Weak coordination among MINFIN, SEGEPLAN, and Congress undermines accountability and alignment of spending with priority areas.
- Results-based budgeting shortcomings:
  - Results-based budgeting is weakly implemented and fragmented despite being adopted over a decade ago.
  - Annual output indicators and targets are rarely linked to outcomes or used to assess progress toward PGG priority results.
  - Execution reports often focus on activity levels rather than whether spending closes service gaps (example: Ministry of Health reports prenatal care counts but not whether services reach priority populations or improve maternal outcomes).
- Recommendations for institutional reform (implied in analysis):
  - Strengthen coordination between MINFIN, SEGEPLAN, and line ministries to ensure financial viability and alignment of major projects with government priorities.
  - Review and reinforce the results-based budgeting model through clearer responsibilities, better data systems, and consistent use of results information throughout the budget process.
  - Improve interoperability of information systems (SINIP, Guatecompras, SICOIN) to enable real-time project monitoring and adjustments.

*Source: IMF staff calculations and analysis using data from WB WDI, WHO GHE, MSPAS 2025 budget data, WB ASPIRE, ENCOVI 2023, Guatemalan authorities, SEGEPLAN, and IMF databases as presented in the chapter.*

### 28.      Beyond the limitations of results-based budgeting, broader disconnects persist

### Beyond the limitations of results-based budgeting, broader disconnects persist

### Key findings on planning–budget disconnects
- Strategic planning instruments exist: K’atun 2032, the PGG 2024–28, and sectoral strategic institutional plans (PEIs), but strategic objectives are not translated into program-level budget ceilings or systematically aligned with financing needs of vulnerable populations.
- Budget allocations rely heavily on historical trends and input targets, with little reference to coverage goals, cost structures, or performance indicators.
- Nutrition example: allocations to high-need municipalities under the child malnutrition program declined from 31 percent in 2019 to 11.5 percent in 2025.
- The PGG identifies priority sectors and strategic results, but these are not linked to program-level budget ceilings.

### Medium-term expenditure frameworks and their limits
- Instruments such as the Medium-Term Fiscal Framework (MFMP) and the multiannual budget process are used more procedurally than strategically.
- Expenditure projections are generally based on baseline adjustments (e.g., salary or inflation growth) rather than rigorous costing of sectoral strategies or expected service delivery changes.
- The MFMP defines general fiscal policy guidelines based on national plans (K’atun 2032 and the PGG) but does not quantify policy goals or assess consistency with fiscal projections.
- Strategic results in the multiannual budget (e.g., targets for 2029) are not clearly costed or accompanied by necessary resources and institutional reforms.
- Ongoing improvement efforts: authorities are aligning revenue paths with tax policy and revenue administration measures, but institutional fragmentation, weak monitoring capacity, and lack of enforcement mechanisms limit MFMP credibility.
- A functional medium-term framework would require:
  - reconciling technical and political priorities;
  - validating sectoral results and spending paths jointly with line ministries;
  - ensuring resource allocations reflect measurable efforts to close coverage and quality gaps.

### Rigid budget structures and execution challenges
- MINFIN estimates that 93 percent of the 2025 budget is considered “rigid”, tied to earmarked revenues, legal mandates, or pre-existing commitments such as public sector wages and pensions.
- Constitutional or legal provisions (institutional contributions and transfers) account for a large share of rigidities.
- Political reallocations affect coherence: the 2025 budget includes an extraordinary increase for local development councils (CODEDEs) of around 0.5 percent of GDP, in part accommodated by reallocating funds away from education, labor, and agriculture (ICEFI, 2024).
- Authorities note that the 2025 allocation increase to CODEDEs is part of constitutionally mandated transfers, which make up only 11.8 percent of the approved budget, and therefore such allocations are not necessarily politically motivated.
- Administrative reallocations remain broad and largely discretionary despite the Organic Budget Law (Article 32, Decree 101-97) and PEFA standards; strengthening ex-ante controls and transparency around budget modifications is needed.

### Weak results evaluation and monitoring
- Despite over a decade of results-based budgeting efforts, there is no institutionalized process to evaluate whether programs achieve intended outcomes.
- Targets and indicators exist for several priority areas but are rarely accompanied by baseline data, cost-effectiveness analysis, or mechanisms to track progress against coverage gaps.
- Guatemala lacks a monitoring system linking budget execution to progress on strategic PGG goals (e.g., reductions in maternal mortality, chronic malnutrition, implementation of the “Mano a Mano” strategy).
- Under the current framework, results monitoring is expected only at the end of the PGG period in 2029, with no intermediate assessments of deviations in budget allocations, underexecution, or performance against targets.
- There has recently been a partnership signed with J-PAL to evaluate Mano a Mano.
- International experience indicates ministries of finance should institutionalize tools and processes (top-down strategies for budget formulation, ex-ante and ex-post evaluations, regular spending reviews) to improve spending quality.

### Reform momentum and opportunities
- Recent reforms create a foundation: strengthening local public investment planning and execution through CODEDEs; improving transparency and fiscal forecasting (revising the MFMP); enhancing performance monitoring via results-based budgeting.
- Constitutional and legal roles: SEGEPLAN assigned for evaluation and MINFIN for budget integration; Article 35 of the Organic Law of the Executive assigns joint responsibility to MINFIN and SEGEPLAN for policies guiding formulation, prioritization, evaluation, and selection of investment projects and programs.
- Authorities show interest in results-based execution and have taken early steps, but reforms have often operated in silos or at pilot level.
- Critical actions recommended to operationalize PGG and multiyear budget targets for 2026–29:
  - develop an actionable implementation strategy;
  - update baselines and review/sequence expected results for 2026–29;
  - align expected results with realistic expenditure projections;
  - clearly assign responsibilities across ministries and programs;
  - institutionalize a results-oriented budgeting culture anchored in stronger data systems, clearer accountability, and strategic leadership from MINFIN.
- Implementation capacity constraints (both physical and financial execution) in institutions such as MICIVI threaten achievement of goals.
- The Directorate of Fiscal Policy Analysis (DAPF) is well positioned to lead spending-evaluation and value-for-money functions and foster cross-ministry collaboration.

### Quantitative scenarios and spending implications
- Even a gradual reallocation of 2 percentage points of GDP toward priority sectors over the next decade could accelerate progress toward development goals set for 2029 and 2032 and move Guatemala closer to performance frontiers in education, health, and infrastructure.
- Figure 16 illustrative public spending series (as shown in the source) includes the following percentages: 6.6%, 6.5%, 1.8%, 2.3%, 0.5%, 0.8%, 3.2%, 4.0%, 2.5%, 3.0% (public spending as a % of GDP by sector/year as presented).

### Conclusion and policy priorities
- Guatemala has launched promising initiatives to improve public spending quality and efficiency that need consolidation and institutionalization.
- The 2025 budget signals commitment to increasing resources to key development areas such as secondary education and water and sanitation, but adequacy alone is insufficient; persistent gaps between budgeted and executed spending—especially in infrastructure—highlight the need for stronger implementation and monitoring capacity.
- Priority policy measures include:
  - strengthen planning–budget linkages and accountability for results;
  - reconcile technical and political priorities within a credible MFMP;
  - reduce budget rigidities where possible and enhance ex-ante controls on reallocations;
  - institutionalize systematic spending evaluations (value-for-money function in MINFIN/DAPF);
  - update baselines, cost expected results for 2026–29, and sequence program implementation with clear responsibilities.

*Source: IMF chapter "Beyond the limitations of results-based budgeting, broader disconnects persist" (Guatemala).*

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_Source: https://www.imf.org/-/media/files/publications/selected-issues-papers/2025/english/sipea2025128.pdf_