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The looming panorama arising in the world in the aftermath of the financial crisis will be a true challenge for those responsible for elaborating public budgets.

Many governments have had to make a great effort to reactivate their economies by an increase in public spending which will oblige them to balance their public finances very cautiously. In the US, after the ruling party and the opposition recently agreed to lower taxes making the fiscal deficit increase dramatically, the highest authority had to propose a 5-year freeze on what the government calls “discretionary spending”. The monetary authority encouraged this request stating that the federal budget “is on an unsustainable path”. For this reason, it urged the government to act promptly to stabilize the budget and thus get the investors to keep financing the government. Meanwhile, the European Central Bank announced that inflation in the Euro zone exceeded the official goal, at the same time that some specialists argued that, except for Germany, the European governments should reduce services to lower their deficits. Japan’s Minister of Economy also announced actions to recover fiscal balance after observing his country’s debt rating fall.

In spite of global efforts to balance public accounts, many governments must improve their economies’ competitiveness, which means an increase in spending on education, infrastructure and technology. It is a difficult crossroads that undoubtedly requires optimizing spending allocation and quality and to find new ways of obtaining resources to improve public services.

The International Journal of Public Budget intends to enrich the debate about these topics which are increasingly important, and it does so especially by the first article in the present issue, where this topic is directly approached. The other articles also constitute a contribution to the debate because, although they don’t directly deal with the topic, they touch upon it very efficiently.

How can governments reap the potential benefits of public-private partnerships (PPPs) in the provision of infrastructure? Sonia Araujo and Douglas Sutherland are the authors of a very important article titled Private-public partnerships and investment in infrastructure, which deals with long-standing private sector involvement in the provision of public goods, often relying on franchises or concessions. More recently, PPPs have risen in prominence, promising innovative solutions and a better allocation of inputs than traditional procurement with separate concessions. However, PPPs are not without risks. The outcome depends on the identification of the most efficient bidder, the risk of sharing between the public and private sector and the design of the contractual relationship. Furthermore, PPPs, particularly when they are used to circumvent budgetary constraints, present risks to government budgets by creating large contingent liabilities. Drawing on a discussion of the economics of PPPs in relation to infrastructure and questionnaire responses, synthetic indicators are used to assess how well-suited policy frameworks in the OECD are to benefit from PPPs. The results show marked heterogeneity across countries, suggesting there is scope to improve performance and gain expertise by considering other countries’ experiences.

Rodrigo Cubero and Ivanna Vladkova Hollar have written an article titled Equity and Fiscal Policy: the Income Distribution Effects of Taxation and Social Spending in Central America that attempts to explain how fiscal policy fares in improving the underlying income distribution in this region. The authors integrate the data from a number of existing tax and public expenditure studies for the countries in the region and find that the distributional effect of taxation is recessive, but small. In contrast, the redistributive impact of social spending is large and progressive, leading to a progressive net redistributive effect in all countries of the region. They also argue that raising tax revenues and giving the proceeds to social spending would undoubtedly improve the income of the poorest households.

Finally, included in this issue is a transcription of the lecture given by Doctor Tabaré Vázquez, former president of the Oriental Republic of Uruguay, in the 37th International Seminar of Public Budget, held in July of the present year in Madrid, Spain. The lecture is titled Towards a better balanced and more sustainable economy: the role of the public sector.

The International Journal of Public Budget brings this material to its readers with the aim of making a contribution to the debate by way of specialists and public officials who truly know the field of budgeting and public finances.