Guyana’s budget process has limited public engagement, insufficient transparency, and weak oversight – IDB

Oct 11, 2018 News

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By Kiana Wilburg

The Inter-American Development Bank (IDB) is of the view that Guyana’s budget implementation could be improved as capital expenditure has consistently performed below expectations.

In one of its most recent reports, the IDB pointed out that in 2016, for example, the public sector investment programme was 23 percent lower than budgeted.

The Bank said that while current expenditure continues to increase, actual capital expenditure has consistently been below budget for three years. It said that the prevailing poor budgetary performance is ascribed to weak institutional capacity in government ministries, lack of adequately skilled staff, and the need for improvements in transparency and procurement.

The IDB said, “It should be noted, though, that efforts are ongoing to improve disbursements of capital expenditure. In this regard, better procurement plans implemented in 2017 for 2018 along with other measures announced in Guyana’s 2018 budget could help to improve the execution of budgeted capital expenditure.”

The Bank said that indeed, the Public Sector Investment Programme (PSIP) improved in the latter part of the 2017, exceeding 75 percent, and the domestically financed PSIP was 10 percent above its year-end estimate. The IDB stated nonetheless that weak fiscal institutions are not isolated and are a reflection of the overall quality of institutions in Guyana.

The Bank said that the quality of the country’s institutions and governance framework can be described as weak, as Guyana underperforms on many indices related to the quality of its institutions. In this regard, the financial institution pointed out that on the World Bank’s Government Effectiveness ranking, Guyana places in the 42nd percentile, compared to 58th for the Latin America and the Caribbean (LAC) region.

With respect to fiscal institutions in Guyana, the IDB said that the existing medium-term fiscal framework is considered weak and is not correlated to strategic goals with expenditure items and debt management. Likewise, the Bank pointed out that “limited monitoring of budget execution occurs, evaluations of impacts are rare, and contingent liabilities are not explicitly accounted.”

It added, “The annual budget process involves negotiation between stakeholders with limited private sector consultation. Parliamentary oversight is also limited to general debates without significant scope for amendment once the budget is presented.”

Further to this, the Bank said that Guyana’s budget framework is governed by the Fiscal Management and Accountability Act (FMAA) of 2003 (FMAA, 2003). It noted that the credibility of the budgetary process is difficult to assess as the country is not included in the Open Budget Index, which measures government budget transparency. Nevertheless, the Bank said that Guyana’s budget process has “limited public engagement, insufficient budget transparency, and weak budgetary oversight.”

BUDGET SUCCESS EVASIVE

On several occasions, Finance Minister, Winston Jordan has noted that when the resource envelope of any national budget is supported by robust institutional structures, effective management systems, and competent leadership, then the chances of successful budget implementation are quite high.

Jordan noted however that when any one of, or a combination of those and other elements break down, success becomes evasive. He said that this is in spite of the fact that expenditure may have occurred.

Further to this, the Finance Minister has noted that the upcoming Budget 2019 represents the fifth and penultimate budget of this administration’s first term in office; and the third consecutive year that it will be presented to the National Assembly ahead of the start of the financial year.

The Finance Minister said during the budget consultations and training workshops, opportunities were presented for all financial officers to take stock of the results that they have achieved – or not achieved – and to redouble efforts to deliver goods and services of a sufficient quantity, quality and timeliness.

Jordan had said, “Many of you have been at the helm of your sectors for several years and, therefore, are in a good position to critically and searchingly examine from whence you came, where you are, and where you are going. As you pause to reflect, let me remind everyone that a national budget is the single most important planning tool in the armory of the Government.”

He continued, “It is a living and dynamic document that gives life to the national and sectoral visions and policies. Most importantly, it is the vehicle through which we implement programmes and achieve national results. As Heads of Budget Agencies, you must pay keen attention to ensuring that these elements are all in place in your respective sectors, regions and agencies.”

The economist added, “The Government commits to making resources available, subject to the fiscal space, for you to pursue workable solutions. Please bear in mind, that expenditure pressures such as those demanded by, for example, our commitment to improving wages and salaries and national security; bridging the divide between the hinterland and the coastland; and narrowing the infrastructure gap, on the one hand, and revenue pressures to lower taxes and tariffs will continue to impose premiums on planning, programming and pro-active performance.”

Since 2015, Jordan said that the Government and its support team have proven that they are up to the task, that they are prepared to implement measures that will benefit a broad cross section of the population. In this regard, the Finance Minister said that the Government has consistently improved wages and salaries; undertaken sweeping tax reforms to improve tax administration and brought greater equity to the tax system.

The Finance Minister said, “We have delivered early National Budgets for 2017 and 2018, to ensure that Heads of Budget Agencies had the entire financial year to implement work programmes – a stark departure from what obtained previously, when budgets were presented as late as end-March and approved in mid-April, thereby implying a two-month turnaround before the next budget cycle began in early July.”

Jordan continued, “Procurement of public goods and services has undergone changes: thresholds have been increased; several training courses in monitoring and evaluation, and  supply procurement have been executed -all with the aim of ensuring an environment that contributes to improved performance in the public service.”

He added, “More recently, we have developed a public-private partnership framework to enable more creative financing approaches, to overcome loss of concessional financing, occasioned by our elevated status of Upper Middle Income Country, as classified by the World Bank.”

Further to this, the Finance Minister told several heads of budget agencies and Permanent Secretaries that spending money is easy. He stressed however that spending money wisely and prudently to effect results takes skill and effort. Jordan told his officers that it means understanding the problem and finding the solution that gives the result, then designing a plan and costing it in a way that delivers value for money, then spending the money.

The Finance Minister said, “Many times, we do the process the other way around: we spend money without understanding what the problem to be addressed is. The predictable result is the wastage of public resources that we are entrusted to spend. It is worth the time and effort – please ensure you secure the skills to understand the problems in your sector, devise solutions, plan for and cost the implementation of these solutions.”

The Finance Minister noted that additional revenue resources on the not so distant horizon present a wonderful opportunity for Guyana to transition from potential to the prosperity, of which many have so often dreamed. He stressed however that money alone has never solved a nation’s problems.

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