Budget Office critical to advancing quality of economic governance – Dr. Thomas

Jun 19, 2015 News

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By Kiana Wilburg
For nearly 23 years, there has been the longstanding issue of distrust in statistics regarding the performance of the country when produced by the government. This led to scathing criticisms of the previous administration.

With President David Granger’s pledge to establishing a Budget Office for the National Assembly, it is believed by several economists and business analysts that such an institute would serve to restore faith in statistics when provided by the new government.
Specifically, Dr. Clive Thomas says that the creation of a Budget Office is also critical to advancing the quality of economic governance in Guyana.
In an interview with this newspaper, Dr. Thomas emphasised that, “a Budget Office is extremely important to the National Assembly. In fact, it was pioneered by the USA but the office is one that should be tasked with several important responsibilities”.
“It will give Parliamentarians an economic office that will allow them to make demands and test the validity of statistics brought by the government. It will also help them to measure various programmes to be brought from government. The office should be another important aspect of the budget debates and the general discussions of the economy.
“But generally, most of our Members of Parliament (MPs) are not well informed on economic matters, whereas the average parliamentarian abroad tends to be more informed simply because their economy is discussed as though it’s a natural thing. So it is going to be empowering for the MPs, particularly those in the opposition, as they will be able to have this office at their disposal. They can enjoy the benefits of an initiative they neglected for so many years.”
Dr. Thomas noted that under the People’s Progressive Party (PPP) there were some essential questions raised about the integrity of the data, information, calculations and statistics they provided.
He said that the aforementioned was often used to inform the three principal tasks of the budget, namely: to review the economy for the period of the previous budget; to indicate the outlays and revenue measures for the budget period and to estimate the impacts on the performance of the economy of the proposed measures and targets.
He said that the value of the Budget Office in restoring faith in the national statistics cannot be underestimated. He stressed that it is important because it guides the nation in ascertaining whether what government proposes to do is too much, too little, or just right.
Dr. Thomas said that it is important to understand where the distrust in national statistics all started. In one of his columns, he had noted that up until 2009, the national accounts were calculated on the base of 1988 prices.  He said that the 2010 Budget stated that henceforth, the administration would present the national accounts calculated from the base of 2006 prices.
The economist noted that several reasons were offered for the rebasing exercise (adopting a new set of reference prices).  These included that the 1988 base had become outdated and did not reflect the present-day sectoral structure of the economy; that Caricom countries had jointly committed to update the statistical base year for calculating their national accounts; and that with technical assistance, the Bureau of Statistics had enhanced its capacity to utilize the more updated editions of the United Nations System of National Accounts, which is the operational manual used by all United Nations members.
Dr. Thomas reminded that when governments are trusted, the rebasing is taken as an exercise done in good faith.  He noted, however, that in Guyana, because of the very old issue of distrust in government-produced statistics, the 2006 rebasing exercise has been viewed with deep skepticism, “and as such, every figure they produced has been taken with a pinch of salt.”
“When the public loses confidence in what you are telling them, for example whether the nation is growing or not, it is simply a worrying sign that they don’t think you are capable of leading them. Lack of faith in the national stats also fuels the perception that government is siphoning off the taxpayers’ monies.”
He said that even international reports documented such levels of distrust.
Dr. Thomas, in this regard, cited the 2010 report by the Economic Intelligence Unit (EIU) which challenged the authenticity of the economic growth figures presented in the 2010 National Budget.  It said, “We believe that the government’s official estimate of real growth of 2.3 percent for 2009 significantly overstates economic performance.”  The EIU went on to give an estimate of 0.9 per cent for 2009.
The economist then emphasized once more that it is important for the National Assembly Budget Office to be implemented. He said that it would permanently erase this confusion and the perennial questioning of the integrity of the budget’s data.
He suggested that the Budget Office should be mandated, among other functions, to provide independent economic analyses of budget measures; economic evaluations of budget measures; assessments of the state of government finances and the estimates;  assessments of trends in the national economy; and periodic reports on fiscal policy.
The economist said that this would be for the benefit of all legislators in the National Assembly.
He said, too, that the Budget Office should also be tasked with providing detailed time-bound baseline analyses of government finances (receipts, expenditure, borrowings, etc), prepare indicative budget projections for the short to long term; prepare special policy briefs and analyses of vital topics (for example, VAT, fiscal incentives, poverty); and undertake medium-term macroeconomic forecasts (incorporating the evaluation of downside risks and upside potentials over the medium-term).
Dr. Thomas also suggested that the Budget Office provide requested periodic reports by members of the National Assembly on crucial considerations on fiscal policy, debt management and external trade dynamics.
“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.”
He then reminded of the House’s Public Accounts Committee (PAC). He said that 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 the Budget Office in pursuing their separate, but linked responsibilities, to the National Assembly,” he concluded.

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