How does one achieve the desired degree of fiscal adjustment and anchor the credibility of government’s budget policies, so that the gains can be sustained over the medium term?
Finance Minister K. Peter Turnquest posed this question to the participants of a seminar held at the British Colonial Hilton Hotel during his opening remarks yesterday at Inter-American Development Bank (IDB) ‘Rules-Based Fiscal Policy Frameworks for the Caribbean Region.
Spanning over two days, the IDB seminar will examine global practices and instill lessons pertaining to key technical operational and institutional issues surrounding fiscal responsibility frameworks in general.
Fiscal rules are relevant for policy makers in the Caribbean that currently have no legislated rules.
“Experience elsewhere has shown that the implementation of legislative fiscal rules, which acts as a binding constraint on fiscal policy are useful in securing fiscal discipline, accountability, transparency and credibility.
The deputy prime minister also spoke on election spending and accountability.
“While not a panacea, we are credited with removing the bias rewards out of spending and the opportunity for policy makers to pursue short sighted gains, normally associated with elections spending,” Mr. Turnquest stated.
Referencing the most recent budget spending, Mr. Turnquest said, “during the recent budget communication, the government announced its commitment to introduce an appropriate fiscal responsibility legislative framework in time for next year’s fiscal budget.”
Fiscal responsibility frameworks and fiscal rules are subject matters of immense interest in the Caribbean currently, as countries consider how to ensure medium and long term fiscal and debt sustainability in light of the Region’s fiscal and debt challenges.
“To be effective however, fiscal rules cannot work in isolation. Our ability to deliver successfully on the measures and transparency requirements is also contingent on the public financial management project currently on the way with an IDB loan,” said the Finance minister.
According to Mr. Turnquest, the government’s planned introduction of accrual accounting by 2022 will assist with transparency requirements.
“Clearly, it is important that we know what our liabilities are and be able to provide timely and complete information to the public on what is happening with the fiscal finances.
“Revenue administration and compliance measures are also an important part of the strategic formula to spur a more balanced consolidated agenda as both sides of the fiscal equation must experience similar reform in order for us to be successful in our overall goal of reducing our debt profile.” Mr. Turnquest said.
Apart from stabilizing the fiscal finances, the government is also committed to addressing the various obstacles to economic growth and the competitiveness of the Bahamian economy.
High on this agenda are some of the following; Energy reform, mitigating adverse weather events such as hurricanes, reforms to improve the ease of doing business and strengthening the business environment.
The IDB Seminar contributes to ongoing policy discussions on the importance of having stronger fiscal institutions with a credible transparent rules-based framework for fiscal policy.
