Mixed Review from Fiscal Responsibility Oversight Committee

Ministry of Finance, Financial Complex, Saint George’s

by Linda Straker

The 5-member Fiscal Responsibility Oversight Committee has given government a mixed review for its compliance of the Fiscal Responsibility legislation for 2016.

In their first report tabled in the House of Representatives on Monday, the committee said of the 6 rules and targets, there was compliance without reservation with 3, 1 compliance with reservation and 2 were totally not in compliance.

“Teething challenges with the introduction of the FRA (Fiscal Responsibility Act) have been advanced as reasons for non-compliance, and the FROC has been advised that systems are being put in place to ensure that all reports required by the FRA are generated and submitted to Parliament on time,” said the Committee in the 60-page report which assesses government’s compliance for 2016 with the special fiscal rules and targets outlined in the legislation.

Explaining that the extent of compliance with the Fiscal Rules and the attainment of targets are pivotal to the sustainability of Grenada’s public-sector finances, the committee said that much of the improvements in Grenada’s public finances have been by design from structural reforms and adjustments.

The compliance without reservation was awarded to growth in primary expenditure which target was not to exceed 2%; Primary Balance whose target was not to be less than 3.5% of GDP and Notional Compensatory primary balance whose balance was set to be not more than 3% of the estimates of estimates of revenue and expenditure.

Receiving the ‘no’ for compliance was the Public Sector Debt of GDP Ratio and Contingent Liabilities arising from public-private partnership which was set not to exceed 5% of the 2016 budget.

Elaborating of the public sector debt, the report said that the members of the committee i not convinced that all elements of the public sector debt as defined in the fiscal responsibility legislation are comprehensively captured and fully accounted for. “Of particular concern are (a) contingent liabilities assumed by the government; (b) the debt and contingent liabilities of statutory bodies and state-owned enterprises,” said the members in the comment section of the summary.

With regards to contingent liabilities arising from public-private sector partnership, the committee said: “FROC is not satisfied the macroeconomic policy unit has a firm handle on this subject. The Fiscal Authorities have not thoroughly, or at all, scrutinised the relationship between government, government agencies and private entities.”

The FROC is different to the constitutionally appointed Public Accounts Committee which should be headed by the Parliamentary Leader of the Opposition. However, the FRA the FROC reports is also being examined by the PAC, the Standing Orders Committee in Parliament and the Standing Committee on Finance of Parliament.

Grenada is the first country in the region with such legislation. It was mandatory required under the Structural Adjustment Programme which Grenada concluded in 2016, but the ruling administration has decided that it will be one of the legislation that will continue because of its positive impact on the economy in the short, medium and long-term.

The committee is comprised of a panel of 4 local experts and 1 regional expert, skilled in the following areas as stipulated in the Act: accounting; business management; public administration; law; and economics. They are: Richard Duncan (Chairman); Angus Smith; Adrian Hayes; and Sabina Gibbs.  Zanna Barnard, a senior economist of the Eastern Caribbean Central Bank, is the regional expert.

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