by Linda Straker
- Fiscal Responsibility Act, Public Finance Management Act, Public Debt Management Act approved in 2015
- Under FRA, Government can suspend rules and targets in case of natural disaster, war, or pandemic
- No more State of Emergency in Grenada
Prime Minister Dickon Mitchell has warned that the 2023 Estimates of Revenue and Expenditure, which will be presented during the last quarter of 2022, will be prepared to conform with the rules and targets as required in the Fiscal Responsibility legislation.
“There is no more State of Emergency in Grenada, and so when we go into the next budget cycle, we will be required to comply with the 3 rules that are set out under that Act for the prudent fiscal management of the affairs of Grenada,” the Prime Minister announced during the 29 September 2022 sitting of the Lower House of Parliament.
The Fiscal Responsibility legislation provides for Government to suspend the rules and targets if there is a natural disaster, war, or pandemic.
“Our expenditure, in particular, must comply with that legislation. Therefore, the opportunity, for instance, to pay the pension arises now, so it’s just not a question of the campaign promise; the reality is, it arises now, and therefore we have the fiscal space to do it now, and we must do so because it may not be permissible under the fiscal responsibility rules which will be in place for the next budget cycle,” he told the members during the first working session of the 11th Parliament of the Lower House.
The members were required to approve EC$60 million to pay retroactive pensions to hundreds of retired public servants who were affected by the 1983 Pension Disqualification Act, which came into effect in 1985 but was deemed to be a violation of their constitutional rights in March 2022.
The EC$60 million was part of the EC$194 million Supplementary Appropriation Bill required to continue the work of the Government.
Mitchell, who is a lawyer by profession, explained that the former New National Party (NNP) administration which was voted out of office on 23 June 2022, had the fortune or misfortune of being able to call a State of Emergency as a result of the Covid-19 pandemic.
“That allowed the former administration to suspend the operations of the Fiscal Responsibility Act,” said PM Dickon Mitchell, who reminded the Parliament that his Government’s fiscal decisions must comply with relevant sections of the Fiscal Responsibility Act (FRA).
The FRA is one of the new financial legislations enacted and enforced by the NNP Government after winning the 2013 General Election. This was done because the Government then recognised and embraced the concept that greater fiscal responsibility and discipline is a key factor that must be attained for the effective management of the country’s economy.
To achieve this by 2015, Government approved the Fiscal Responsibility Act, the Public Finance Management Act, and the Public Debt Management Act No. 28 of 2015, all essential to the Government’s 3-year homegrown Structural Adjustment Programme.
Among the rules and targets under the FRA are that the rate of growth of the primary expenditure of the Central Government, and of every covered public entity, shall not exceed 2% in real terms in any fiscal year when adjusted by the preceding year’s inflation rate. The Minister of Finance shall take appropriate measures to ensure that the ratio of expenditure on the wage bill shall not exceed 9% of GDP, and the Minister shall ensure that contingent liabilities arising from, as a result of, or in connection with public-private partnerships shall not exceed 5% of GDP.
The FRA states that 40% of the monthly inflows into the National Transformation Fund shall be saved for general budget financing purposes, including contingency spending, natural disasters, and debt reduction.