This chapter examines Chile’s historical fiscal strengths, identifies emerging fiscal and institutional challenges, and outlines the imperative for institutional reforms that can enhance Congress's capacity to play a more constructive and effective role in budget oversight.
OECD review of parliamentary budget oversight in Chile
Chile has established a strong record of fiscal responsibility and macroeconomic stability over recent decades, transitioning from a history of recurrent budget deficits prior to the mid-1980s. This sound fiscal performance has been central to the country's notable achievements in economic growth.
A key pillar supporting this performance is a set of robust budget institutions that concentrate fiscal power within the executive branch, specifically the President and the Ministry of Finance. This concentration evolved historically, culminating in the 1980 Constitution and the Financial Administration Law, which grants the Ministry of Finance, and particularly its highly respected Budget Office (Dirección de Presupuestos, DIPRES), significant control over designing, negotiating, and executing the budget. DIPRES plays a stronger role than its counterparts in most OECD countries.
Since 2001, Chile's fiscal policy has been anchored by a structural budget balance rule, designed to ensure long-term sustainability while permitting counter-cyclical responses to economic fluctuations. This rule separates public expenditure decisions from the volatility of commodity prices, particularly copper, which significantly impacts government revenues. To enhance credibility and independence, key parameters for the rule, such as trend GDP growth and the long-term copper price, are determined by independent expert panels.
In 2013, an Advisory Fiscal Council (Consejo Fiscal Asesor) – later becoming the Autonomous Fiscal Council - was established to advise on the application of the fiscal rule, further strengthening the institutional framework.
This institutional setup, emphasising fiscal discipline through rules, a strong central budget authority, independent advisory bodies, and stabilisation mechanisms, has allowed Chile to put in place two sovereign wealth funds, maintain a robust fiscal position with minimal net debt, and effectively manage economic cycles. The strong political commitment to fiscal sustainability across different administrations further reinforces this framework.
While Chile's historical fiscal performance has been strong, the nation faces an evolving fiscal landscape presenting new challenges. The period of exceptional economic growth, significantly fueled by high commodity prices, has subsided. Projections for structural GDP growth have moderated, and copper revenues have declined and are expected to remain lower. Chile has recorded fiscal deficits in 12 of the past 14 years (see Figure 1), and public debt has climbed to 45% of GDP (OECD, 2025[1]).
Source: (OECD, 2025[1])
The convergence of slower economic growth, lower tax revenues and growing budgetary demands has inevitably placed pressure on public finances, narrowing the available fiscal space (OECD, 2025[1]). The fiscal strategy for 2025–2029 relies heavily on improving spending efficiency as well as curbing public expenditure. A key challenge to this is the large proportion of public spending that is mandatory – 92% (Dirección de Presupuestos, 2025[2]). This structural composition significantly limits the government’s budgetary flexibility, underscoring the need for careful prioritisation.
Compounding these challenges is a recent issue of revenue misestimation. Since 2022, income tax revenues have been consistently overestimated. To address this, a dedicated unit has been established within DIPRES to strengthen revenue modelling.
1.2.1. Further strengthening of Chile’s fiscal framework
Recognising these challenges, Chile has undertaken significant steps to reinforce its fiscal framework. A key development was the replacement of the Advisory Fiscal Council established in 2013 with an Autonomous Fiscal Council (Consejo Fiscal Autónomo, CFA) in 2019. This reform substantially strengthened the Council's independence and remit (see Box 1).
Initially established in 2013 as the Consejo Fiscal Asesor, the Council functioned as an advisory body created by decree. However, it faced limitations: it lacked legal autonomy, had no dedicated staff, and its members were appointed by the Minister of Finance without compensation. These constraints hindered its effectiveness in providing independent fiscal oversight.
In 2018, the Chilean Government proposed legislation to transform the advisory council into an autonomous fiscal institution. This move was influenced by:
Expert recommendations: Both domestic and international experts advocated for a legally established, independent fiscal council to enhance fiscal responsibility.
Political consensus: There was broad political agreement on the need for an autonomous fiscal body to provide unbiased oversight.
Desire for enhanced oversight: An autonomous council was seen as a necessary counterbalance to executive fiscal decisions, promoting transparency and accountability.
The law passed in January 2019 established the Consejo Fiscal Autónomo (CFA) as an independent entity with legal autonomy. Its mandate was significantly expanded to include evaluating fiscal policy, monitoring compliance with fiscal rules, and assessing the sustainability of public finances. The governance structure was formalised, with Council members appointed by the President and ratified by the Senate, serving staggered five-year terms to ensure institutional continuity. Additionally, the CFA was granted dedicated resources, including its own budget and the authority to hire staff, thereby enhancing its operational and analytical capacity.
Despite these strengths and ongoing refinements in the executive's fiscal management and oversight institutions, effective institutional arrangements for congressional budget oversight remain underdeveloped, creating a weakness in the system.