In last week’s Sunday column, I had indicated my plan is to link last year’s analysis of the 2011 National Budget with my evaluation of this year’s. In this regard, two crucial observations carry over from last year’s analysis. The first of these is the concern which I had expressed earlier about data quality, remain just as valid.
The massaging of economic data continues unrelentingly. Further to my recap of this concern in last week’s column, I refer readers for more information on this matter to two earlier columns of mine, which can be retrieved from the Stabroek News’ archives namely, Magnifying effect of rebasing the national accounts (September 26, 2010) and Magnification or manipulation: Guyana’s rebased national accounts series (October 2, 2010).
The second observation is that I am now more convinced than ever, the only way to permanently erase the decades-old problem of questionable national economic data is to establish an independent non-partisan Budget Office, located in the National Assembly, such as I had recommended last year.
For this week’s discussion, I shall expand on last year’s proposal to create a National Assembly Budget Office (NABO), as this remains, in my judgement, even more urgent in today’s political and economic environment, if we are to advance the quality of economic and financial governance in Guyana.
The National Assembly Budget Office
The skeletal outline of the NABO which I presented last year, captures only its essential features. Since then, several readers have asked for more information. To recall, I had recommended that NABO be established by statute, located in the National Assembly (as an autonomous body), and independently funded.
To be effective it should also be adequately staffed with professionals and specialists, and sufficiently endowed with resources so as to be able to function effectively. I had suggested five key functions for the NABO, namely: 1) to review and analyse draft annual National Budgets prepared by the executive; 2) to cost proposed legislation; 3) to provide economic forecasts and review estimates; 4) to evaluate government programmes; and 5) to provide oversight of the budgetary process (maintenance of accounting standards, spending records, public financial management and so on). In what follows, I shall elaborate on the skeletal framework presented last year.
I begin by expanding on the original proposed functions in order to give a fuller idea of the range and scope of the NABO I am envisaging.
From my perspective the NABO would undertake the following tasks in addition to those cited above: 1) prepare budget baseline forecasts and outlook assessments; 2) provide detailed time-bound baseline analyses of government finances (receipts, expenditure, borrowings, etc); 3) based on 1 and 2, prepare indicative budget projections for the short to long term; 4) provide close analyses of Budget measures and options; 5) prepare special policy briefs and analyses of vital topics (for example, VAT, fiscal incentives, poverty); 6) undertake medium-term macroeconomic forecasts (incorporating the evaluation of downside risks and upside potentials over the medium-term); 7) provide requested periodic reports by members of the National Assembly on crucial considerations (for example, fiscal policy, debt management and external trade dynamics).
Last and by no means least, a critical function of the NABO is to restore and build trust in official economic data. This data integrity function cannot be over-stated.
Of course the above listed functions are not cast in stone. Members of the National Assembly (irrespective of political party affiliation) would be able to propose additional functions to those indicated here, as well as recommend deletions from the list I have presented above.
It is my fervent expectation that as members of the National Assembly deliberate on these matters, it would provide a unique opportunity for building consensus and trust within the boundaries for the Assembly itself.
It should be constantly recognized that, in no manner or form, is the Budget Office designed to dilute party membership or loyalty. Rather, its aim is to enhance both through empowering members of the National Assembly to effectively deliberate on financial matters, without having to routinely defer to indications and/or information solely provided by the executive branch of government.
In my proposal it is clear that the Budget Office is designed to be located in the parliamentary branch of government (National Assembly). However, in practice such institutions have been located in the executive branch of the government. It should be noted that because of the possibility of locating it outside of Parliament some analysts prefer to use the term ‘Fiscal Institution,‘ rather than Budget Office. Thus a recent (2011) publication of the OECD cites a few regularly used definitions of this term, which are quoted below.
One of these describes Independent Fiscal Institutions as: “Institutions funded by but independent of government, which provide public advice on fiscal issues.” Or, alternatively as “a publicly funded entity staffed by non-elected professionals mandated to provide non-partisan oversight of fiscal performance and/or advice and guidance on key aspects of fiscal policy.”
Another definition stresses the role of their autonomy. Thus these have been defined as: “non-partisan public bodies, other than the central bank, government, or parliament [my emphasis] that prepare macroeconomic forecasts for the budget, monitor fiscal performance and/or advise the government on fiscal policy matters … primarily financed by public funds and are functionally independent vis-à-vis fiscal authorities.”
As we go along readers should keep in mind that the National Assembly (like other parliaments of British-origin) has a Public Accounts Committee (PAC). This is a key component of parliamentary oversight and monitoring of the finances of the executive branch of government.
It is therefore expected that the PAC will develop strong cooperation/collaboration with NABO in pursuing their separate, but linked responsibilities, to the National Assembly.
Next week I shall indicate the reasons for my preference for locating the Budget Office in the National Assembly before proceeding to wrap up the discussion.