Executive Summary from the 2022 FROC Annual Report, 31 March 2023
The Fiscal Responsibility Act (FRA) of 2015 and its amendments set out rules and targets to guide the conduct of fiscal policy in Grenada.
The FRA together with the Public Finance Management Act (2015) and the Debt Management Act (2015) are intended to ensure fiscal discipline, transparency in government financial transactions, accountability in government operations, and fiscal and debt sustainability. The Fiscal Responsibility Oversight Committee (FROC) was established under the FRA with the mandate to monitor and report to the House of Representatives on the compliance of Government with the provisions of the FRA.
The declaration of a state of emergency by the Governor General as a result of the Covid-19 Pandemic and the negative impact of the pandemic on economic growth led to the suspension of the fiscal rules and targets for fiscal year (FY) 2020 through to FY 2022. Following the suspension of the fiscal rules and targets in 2022, the Government returned to the fiscal rules and targets in 2023. In the wake of this suspension, the FROC’s report for 2022, therefore, examines compliance of the government with the requirements for the suspension of the fiscal rules and targets in 2022; the transparency of Government’s fiscal operations in 2022; and the consistency of the 2023 budget and medium-term fiscal framework with the FRA. The FROC also examined the FRA and its implementation and put forward proposals for its reform.
Recommendations from the 2022 FROC Annual report At a Glance, 12 April 2023
Reform of the FRA
The FROC recommends the elimination of the expenditure rules for primary expenditure and the wage bill, and, if an expenditure rule is necessary, it should be based on best practices. The overall fiscal balance is the indicator of whether the Government accumulates debt, and therefore, this should be introduced as a target. The FROC also recommends that the targeted debt-to-GDP ratio be revised and a timeline established to achieve the targeted public sector debt-to-GDP ratio. The fiscal rules and targets should be applied to Central Government, except the public debt, which should cover the total public sector, and the statutory bodies and state-owned enterprises monitored in accordance with the Public Finance Management Act. A medium-term fiscal framework, with indicators for achieving the debt target, should be prepared and approved by Parliament.
FROC
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