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Lower House approves Fiscal Resilience Bill to strengthen Financial Management and Transparency

Economic Development Minister Lennox Andrews - increase in wage bill percentage points will not negatively affect government’s ability to meet other recurrent expenditures

In a significant move toward promoting fiscal resilience and transparency, the Lower House of Parliament has approved the Fiscal Resilience Bill, slated to replace the Fiscal Responsibility Act No.29 of 2015.

Introduced by Leader of Government Business, Housing Minister Phillip Telesford, the bill aims to fortify the country’s fiscal policy framework and accompanying risk management systems.

The new legislation addresses recommendations made by the Fiscal Responsibility Oversight Committee (FROC) and follows a review initiated in 2018 under the former New National Party (NNP) government.

Key changes include increased supervision over the government’s fiscal performance by the Oversight Committee, which will now be known as the Fiscal Resilience Oversight Committee.

One contentious point in the bill is the increase in the wage bill rule from 9% to 13% of GDP which was clarified by Economic Development Minister Lennox Andrews who dismissed concerns raised by Opposition Leader Dr. Keith Mitchell.

The former Prime Minister had questioned the long-term implications for the government recurrent expenditures and revenues, as well as the impact on its ability to carry out other fundamental responsibilities, including the capital programme and social services.

Minister Andrews stated that the increase represents four (4) percentage points, not the “44%” asserted by Dr. Mitchell, and affirmed that it would not hinder the government’s ability to meet other recurrent expenditures.

Finance Minister Dennis Cornwall explained that the bill also allows the government to accrue a surplus of “1.5%,” enabling efficient implementation of capital projects and timely debt payments.

“We have sat down and crunch the numbers to show that it would give us a room to be able to at least implement our capital projects at a far greater rate of implementation, as well as we should be able to pay our debts on a timely basis and to ensure that we stay on a resilient and sustainable path at the end of the day,” Minister Cornwall informed the House.

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The legislation further expands the definition of public debt to include statutory bodies and state-owned enterprises, and facilitating better monitoring of the country’s overall debt situation.

It also introduces measures for the Ministry of Finance to oversee statutory bodies and state-owned enterprises.

Prime Minister Dickon Mitchell highlighted the government’s objective to manage the country’s debt in accordance with the legislation’s performance indicator targets, as well as ensuring that Grenada’s debt to GDP does not exceed 60% by 2035.

According to the Grenadian leader, the central government debt as inherited from the former administration stands at EC$2.59 billion,” and “$522.7 million” has been accumulated by state-owned entities.

The Fiscal Resilience Bill also introduces increased oversight for the use of the Escape Clause, allowing for temporary emergency measures, subject to parliamentary approval.

Once passed by both Houses of Parliament, the Fiscal Resilience Bill will guide fiscal policy, ensuring sustainable management of Grenada’s finances, even in the face of unforeseen challenges such as international conflicts, pandemics, natural disasters, and economic crises.

Amendments to the Public Debt Management Act of 2015 were also made to include explicit contingent liabilities, aligning with the proposed changes in the fiscal resilience legislation.

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