The conduct of fiscal policy, as outlined in the national budget, is guided by the Fiscal Responsibility Act No. 29 of 2015 and its subsequent amendments.
The purpose of the FRA is to ensure that the fiscal and financial affairs of the Government are conducted in a transparent manner; there is full and timely disclosure, and wide publication of all transactions and decisions involving public revenues and expenditures and their implications; that public sector debt is reduced to, and then maintained at a prudent and sustainable level; and there is prudent management of fiscal risks.
To facilitate this, the Fiscal Responsibility Act establishes a rules based framework to guide the operations of the Central Government and the operations of selected statutory bodies and state-owned enterprises.
As part of its monitoring function, the Fiscal Responsibility Oversight Committee (FROC) examined the fiscal and debt reports of the Central Government for the first quarter of 2023.
Based on the monthly Fiscal Summary Report for the period January to March, the primary fiscal balance and the overall fiscal balance were higher than what was targeted, influenced primarily by higher revenue collections.
Expenditure for the same period was less than projected. Looking ahead for the rest of the year, the Government’s fiscal position is expected to remain strong, although expenditure is expected to increase somewhat as wage negotiation concludes and the wage bill reflects the negotiated salaries and as the Government intensifies its capital spending.
Once expenditures remain within budget, and revenues continue to be higher than targets, the Central Government accounts are projected to be in accordance with the fiscal rules and targets for the real growth in primary expenditure of no more than 2 percent in real terms, the wage bill of 9 percent of GDP, and the primary balance of 3.5 percent of GDP.
The stock of public sector debt, as a percentage of GDP, is trending downward, but with a total public sector debt of $2.6 billion or 74.5 percent of GDP, comprising Central Government and Government Guaranteed debt of $2.1 billion or 59.1 percent of GDP, and the debt of statutory bodies and state-owned enterprises of $0.5 billion or 15.4 percent of GDP, is expected to remain above the targeted 55 percent debt to GDP ratio.
In relation to fiscal transparency, improvements were observed in the published fiscal and debt reports. The monthly Fiscal Summary Report included the ‘year-to-date’ state of the government finances.
The quarterly Debt Bulletin clearly differentiated between the Central Government debt and that of the statutory bodies and state-owned enterprises. The Government is urged to continue addressing the fiscal transparency issues as outlined in the FROC 2022 Annual Report.
The FROC has identified deficiencies in the Fiscal Responsibility Act which inhibits its full implementation and the effective monitoring of the Act. As such, the FROC supports the commencement of the process by the Government for reforming the Fiscal Responsibility Act.
The objective should be to ensure fiscal transparency and maintain fiscal and debt sustainability. The reformed Act should be simple, consistent, and easy to implement and monitor, while allowing for flexibility for the Government to manage and transform the economy.
The above was submitted by Laurel Bain, Chairwoman of the Fiscal Responsibility Oversight Committee