The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Chamber’s chairman has renewed calls for the Government to switch to programme-based budgeting, arguing that this will enable Bahamians to assess whether it is “cutting into the root causes” of its multi-million dollar deficit.

Gowon Bowe told Tribune Business that the Government needed to reform its Budget format so that the effectiveness of all spending initiatives and programmes can be properly assessed.

“The main thing I would say, certainly looking at the Budget statement and the hard fiscal numbers, is that we have to get to a programme-based Budget reporting basis,” Mr Bowe told Tribune Business.

“Because the numbers are not programme-based, it’s difficult to have an appreciation for whether we are spending money wisely.

“It’s difficult to analyse whether we are cutting into the root cause of our deficit problem, which is recurrent expenditure.”

The Budget is currently broken down into Ministries, departments and ‘type of spending’, making it difficult to assess whether each programme/initiative is delivering the desired results and taxpayer ‘value for money’.

As a result, it is hard for the Government to determine whether it is spending the correct sum of money in area, and if it is achieving optimum efficiency.

Mr Bowe previously indicated that the International Monetary Fund (IMF) wants the Government to move to a system where it assesses the effectiveness of its spending on a programme-based basis, so it can evaluate if it is successful with the monies spent and change course quickly if necessary.

The Chamber chairman told Tribune Business that in the absence of programme-based Budgeting, it was “very difficult to understand” how different government programmes “filter into the numbers” relating to the fiscal deficit.

Introducing such a regime, he added, would bring “sense and sensibility in understanding the numbers” and the Government’s financial position.

Understanding the Budget numbers, and fiscal position, was made harder for 2015-2016 after the Government switched several items from its capital spending account to recurrent expenditure, as it moves to comply with International Public Accounting Standards (IPSAS).

The change made year-over-year comparisons difficult with so many different line items being reclassified.

The Christie administration is also projecting a $7 million ‘surplus’ for the second half of the 2015-2016 fiscal year, given that its $150 million full-year estimate is lower than the $157 million worth of ‘red ink’ seen at the half-year.

Many, including Mr Bowe, have been surprised by this projection, given that the mid-year Budget showed the Government was quietly increasing its total spending forecast for the 2015-2016 fiscal year by $62.636 million

The data accompanying the mid-year Budget presentation showed that recurrent spending, which covers the Government’s fixed costs, such as salaries and rents, was forecast to exceed last year’s May Budget estimates by $48.197 million.

And capital spending, which involves infrastructure and public works, was also forecast to overshoot original estimates by $14.438 million.

The revised estimates took the Government’s total spending for 2015-2016 to $2.403 billion from $2.34 billion, a 2.7 per cent increase.

And, with total revenue estimates unchanged at $2.047 billion, it appeared that the projected GFS deficit measure for the 2015-2016 fiscal year could exceed $200 million - a sum equivalent to around 2.5 per cent of GDP.

The Government is also working with the Bahamas Institute of Chartered Accountants (BICA) to come into line with international public sector accounting standards, via an eventual switch from switched from a cash-based to accrual accounting system.

Until this happens, it is impossible to determine the extent of the Government’s liabilities and spending commitments. The Government’s reliance on its existing cash-based system means that future spending obligations, which it has already committed to, are not necessarily picked up in the financial data presented with each full and mid-year Budget.