Budget problem

THE experience of the Caribbean with the budgetary process over the past ten years indicates that there is much room for improvement.

So says Dr. Dave Seerattan, Research Fellow at the Caribbean Centre for Money and Finance.

In a commentary on fiscal policy in the region, Dr. Seerattan said that in particular, revenue forecasts tend to be very inaccurate, governments almost never stick to their expenditure targets, and public sector investment programmes are notorious for their lack of implementation.

“In this context, medium term fiscal consolidation programmes generally do not meet their targets, both reflexing and amplifying the region’s fiscal sustainability challenge,” Seerattan said in the commentary appearing in the most recent edition of the regular CCMF newsletter.

“Very importantly, governments in the region are only now starting to focus on value for money and asking questions about the kind of output or services they are getting in return for public expenditures,” the Research Assistant maintained.

Measures

Saying that this is an important development in the Caribbean’s public sector governance culture, Seerattan said in the publication that it “can be a catalyst for more of the fundamental change that is required to address weaknesses in the budgeting process in particular, and the fiscal challenge in general, faced by the region.”

According to him, “In terms of specific policy imperatives, among the most pressing issues on the revenue side is the need to improve revenue buoyancy of the tax system and administrative efficiency.”

He noted that some specific measures that may aid in this process include reducing outstanding arrears on VAT and personal income tax, simplifying the tax system, training to address human resource constraints, and substantial efforts to improve tax administration including institutional change, such as centralising the tax collection in one agency.