Comprehensive quantitative evaluation of municipal budget allocation efficiency: The Portuguese case

Type of the article: Research Article AbstractThe study provides a comprehensive quantitative evaluation of municipal budget allocation efficiency in Portugal over the period 2018–2022, based on a comparative and longitudinal analysis of financial data from 308 municipalities. Efficiency was assessed by examining the alignment between budget forecasts and actual financial execution. The results show that 77.6% of municipalities (n = 239) were classified as efficient in 2018, increasing to 82.1% (n = 253) in 2019 and 83.1% (n = 256) in 2020. However, a downward trend followed, with efficiency declining to 74.0% (n = 228) in 2021 and 73.7% (n = 227) in 2022. Over the five-year period, the average efficiency rate across all municipalities was 78.1%. In contrast, 21.9% of municipalities on average (ranging from 16.9% to 26.3%) consistently demonstrated inefficiencies in budget preparation and execution. The study identifies key contributing factors to inefficiency, including political interference, reliance on incremental budgeting approaches, and limited technical forecasting capacity. The data reveal persistent discrepancies between budgeted allocations and actual service demand, leading to resource misallocation and reduced fiscal credibility. Statistical patterns also indicate that municipalities with higher population densities and more diversified revenue sources tended to perform better in efficiency metrics. The findings support the conclusion that the adoption of rigorous, data-driven forecasting methodologies significantly improves financial planning outcomes and institutional trust. These results offer evidence-based recommendations for refining municipal financial management practices, particularly in settings subject to political and economic volatility. AcknowledgmentThis article is financed by Instituto Politécnico de Setúbal [Polytechnic Institute of Setúbal].