REDIRECTING PUBLIC EXPENDITURE IN PORTUGAL
Ministry of Finance and Public Administration PortugalPaper completed: December 20051. Objectives and challenges
Portugal has currently a strong fiscal imbalance (6.0% of GDP in 2005) and therefore the key target of
fiscal policy is to reduce the government deficit and to put an end to the excessive deficit situation. This
objective and the trajectory to attain it were laid down in the last update of the stability programme for
the period 2005-2009 and in the State Budget for 2006. Since 2002, apart from measures on the revenue
side, a number of measures aiming at curbing expenditure growth have been taken. Albeit those
measures concerned mainly the social security systems, the education and health sectors were as well
object of consolidation. Efforts that have been made to limit nominal growth of education and health
expense are mainly directed at eliminating waste and enhancing efficiency in those areas, which is also in
line with the Lisbon Strategy. At present, a far-reaching public administration reform is being planned.
Such a reform announced both in the Stability and Growth Programme and in the 2006 Budget, will
trigger a reallocation of civil servants and a reduction of their total number. Besides a deep overhauling
of public institutions, the reform will comprehend a change in the incentive schemes given to civil
servants as well as of the existing professional careers.
Besides the stability programme and the State Budget, the government presented to the Parliament a
Technological Plan^1 on 24th November, on which there are laid down priorities for public expenditure.
This Technological Plan defines a five-year period growth strategy to improve Portuguese
competitiveness and has three main axes: 1. Knowledge – improving the average level of education,
organizing lifelong learning and spreading the access to Information and Communication Technology; 2.
Technology – promoting scientific culture namely in technological areas; reinforcing the number of
investigators and increasing investment in R&D; 3. Innovation – reinforcing the diffusion and adoption
of the outcomes from R&D activities to improve competitiveness and productivity. Therefore, this plan
aims at enhancing the quality of public expenditure.
The main measures that have been taken and its relationship with quality and efficiency of expenditure
are examined in the next section.
(^1) The National Action Plan for Growth and Employment 2005-2008 (Plano Nacional de Acção para o Crescimento e
Emprego), which specifies measures in the framework of the Lisbon Strategy, has 3 axes: 1. Macroeconomic stability
(defined in the stability program), Employment (defined in the National Plan for Employment) and Competitiveness
(defined in the Technological Plan).