ON THE RIGHT: Govts turn focus to value for money
The public budgetary process in the Caribbean has come under increased scrutiny in the last decade because of weakening government finances and concerns about the sustainability of public debt in the region. The evolution and effectiveness of the budgetary process in the Caribbean over time has obviously contributed to the current financial position of these countries.
In this context, the extent to which government’s fiscal policy implementation over time was consistent with financial targets in the budget documents, whether the structure of these budgets was conducive to efficiency and growth and whether the policy stance adopted was pro or counter-cyclical, were important factors determining the current financial position of sovereigns in the region.
A broad assessment of the macroeconomic performance of the countries in the region in the last decade suggests that growth has been muted and fiscal positions relatively weak in most, especially immediately after the onset of the global economic and financial crisis in 2007/2008.
The commodity producers in the region have fared better but this often masks underlying vulnerabilities such as an extremely high structural dependence of government revenues on volatile commodity prices, as well as underdeveloped systems for managing public finance and, very importantly, the absence of sufficient focus on getting “value for money” in public expenditure programmes.
In this environment, the effectiveness of countries’ public finance management systems is critical, and improving the effectiveness of the budgetary process in particular is central to addressing the generally weak fiscal position of most sovereigns in the region.
The experience of the Caribbean with the budgetary process over the last ten years indicates that there is much room for improvement. In particular, revenue forecasts tend to be very inaccurate.
Governments almost never stick to their expenditure targets and public sector investment programmes are notorious for their lack of implementation. In this context, medium-term fiscal consolidation programmes generally do not meet their targets, both reflecting and amplifying the region’s fiscal sustainability challenge.
Very importantly, governments in the region are only now starting to focus on “value for money” and asking questions about the kind of output or services they are getting in re-turn for public expenditures. This is an important development in the public sector governance culture in the region and can be the catalyst for more of the fundamental change that is required to address weaknesses in the budgetary process in particular, and the fiscal challenges in general, faced by the region.
In terms of specific policy imperatives, amongst the most pressing issues on the revenue side is the need to improve revenue buoyancy of the tax systems and administrative efficiency.
On the expenditure side, the issues of the efficiency of public expenditure and the need for performance-based expenditure programmes which require improved monitoring and evaluation systems, were consistent themes amongst policy-makers in the region.
Some policy recommendations that can help improve the public budgetary process in the Caribbean include the introduction of permanent income budgeting, the rationalising/ privatising of state enterprises, improved budgeting frameworks, the change in the public sector governance culture in the Caribbean.
• Dr Dave Seerattan is research fellow, Caribbean Centre For Money And Finance.