by Linda Straker
- FROC members are Laurel Bain, Leon Bullen, Annette Henry, Kippling Charles, and Kim George
- Committee recommends review of section of Fiscal Responsibility Act which mandates targeted debt-to-GDP ratio of 55%
- Committee recommends legislation be amended to eliminate wage bill of 9% of GDP
The Fiscal Responsibility Oversight Committee (FROC) recommends that Government review the section of the Fiscal Responsibility Act which mandates that the targeted debt-to-GDP ratio of 55%, establish a revised targeted debt-to-GDP ratio and determine a timeline for the attainment of the revised debt-to-GDP ratio.
“The targeted debt to GDP ratio should be applied to the total public sector, and the other rules and targets should be applied to Central Government. The statutory bodies and state-owned enterprises should be monitored, and reports presented to Parliament in keeping with the Public Finance Management Act,” the Committee said in the 2022 annual report to be tabled in the Upper House of Parliament on 5 May.
“The fiscal rules and targets should be accompanied by the requirement for a well-developed medium-term fiscal framework, that is approved by Parliament, for achieving fiscal and debt sustainability. In this framework, indicators for revenue, expenditure, and primary balance could be included and monitored annually or as determined by the Executive,” the Committee said in its list of recommendations to the Government.
This is among several recommendations from the Committee calling on the Government to reform sections of the Fiscal Responsibility Act. Laurel Bain, who worked for 25 years in various positions at the Eastern Caribbean Central Bank, became the Committee chairperson on 1 September 2022. She was one of 2 new appointees to the Committee following the June 2022 General Election. The other FROC members are Leon Bullen, Annette Henry, Kippling Charles, and Kim George.
The FROC is also recommending amended legislation to eliminate the fiscal rules of real growth of 2% in primary expenditure and the wage bill of 9% of GDP.
“If an expenditure rule is considered necessary, amend the rule to conform with best practice which is based on a technical rationale for an appropriate numerical value for the growth in primary expenditure, the variable that should be used to adjust the growth in primary expenditure, and the elimination of capital expenditure from the primary expenditure rule,” said the 2022 report, recently tabled in the Lower House of Parliament.
The Committee argues that alternatively, a simple, intermediate target is a current account balance that ensures that the Government generates adequate savings.
The Committee is also recommending that the legislation be amended to provide for the introduction of a target related to an overall fiscal balance which results in a reduction in Central Government debt until the debt to GDP ratio is achieved and then maintain an overall balance that constraints the rapid accumulation of debt.
“This would be in the context of a targeted debt for the rest of the public sector,” is the justification provided for that recommendation.