CONCERNS raised by the Auditor General (AG) about targets in Ministry of Finance and Planning's Fiscal Policy Paper (FPP) 2012/2013, including the Debt to Gross Domestic Product (debt/GDP) ratio, will be probed by Parliament's Public Accounts Committee (PAC) this week.
Gordon House released a schedule Friday excluding a meeting of the PAC, but Chairman Audley Shaw, Opposition Spokesperson on Finance, insists that there will be the usual meeting Tuesday morning.
In a report, based on her department's examination of the Fiscal Policy Paper (FPP) 2012/2013, which was tabled in the House of Representatives in May, Auditor General Pamela Monroe Ellis highlighted differences between the legislative targets and those projected in the FPP, including for the reduction in the Debt/GDP ratio by 2015/2016.
"The debt/GDP ratio is projected to trend towards 104.2 per cent by financial year 2015/16, which is outside the legislated target of 100 per cent. On that basis, in my opinion, the FPP does not comply with the principle stated in Section 48D (a) of the FAA Act, which requires that 'total debt is to be reduced to, and thereafter maintained at, a prudent and sustainable level," the AG reported.
However, the ministry, in a response to her query, disagreed; claiming that the FPP clearly shows an improving fiscal position (lower deficits), "which supports a debt trajectory that declines to prudent levels over the medium term".
"The FPP embodies astute fiscal management, as reflected in the quantified expenditure and revenue measures, that will facilitate a fall in the Debt/GDP ratio from 128 per cent in March 2012 to 104.2 per cent by March 2016," the ministry stated.
"The other measures mentioned in the FPP, though not quantified, will serve to further reduce the debt to the legislated target of 100 per cent of GDP by March 2016," the ministry insisted.
The Ministry also noted that it maintains a matrix that quantifies some of the stated fiscal risk, but is of the view that for market sensitivity reasons "it would not be useful to include them in the FPP at this time".
The ministry said it was difficult to quantify some of the risks, for example — Changes in Government Policies — as this can be wide in scope and impact and hence challenging to pinpoint and quantify all the possible associated risks.
"Importantly too, where negotiations and agreements are required with stakeholders, for example labour unions and bargaining groups, explicitly specifying, quantifying and publishing the risks could be a risk in and of itself, in that these negotiations could be compromised and prejudiced. The ministry will nevertheless continue to monitor and assess these risks and quantify them as far as practically possible," the ministry said.
Monroe-Ellis reacted that, in light of the ministry's response, she would not form an opinion on whether the FPP complied with the principles. However, in her recommendations, she urged the ministry to clarify the principles and identify their related targets to allow for an assessment of whether the FPP is in compliance therewith.
These principles were:
(1) Fiscal risks are to be managed prudently, with particular reference to their quality and level;
(2) Borrowings are to be geared toward investment activities that support productivity and economic growth.
She suggested that, in the future, the ministry should disclose the FPP's timeline for the implementation of measures to close the fiscal gap, and the savings/revenue they are expected to generate or contribute, as well.
The FAA Act was amended in 2011 to impose a duty on the minister of finance to table in Parliament, annually, a Fiscal Policy Paper (FPP) containing, among other things, a macroeconomic framework providing an overview of the state of the economy.
The Bill also imposed on the Auditor General a duty to review the FPP and report to Parliament thereon, and to authorise the finance minister to withdraw, suspend, or impose conditions on any expenditure authorised under a warrant issued pursuant to Section 117 of the Constitution, if the exigencies of the financial situation so require.
Shaw said that the changes allow Parliament to have greater oversight into the operations of public bodies.