April 6 ,2021
Weaknesses in Guyana’s Public Financial Management (PFM), including the procurement system, undermine its effectiveness, integrity of spending quality and reporting, according to an Inter-American Development Bank (IDB) report.
“The current PFM processes and systems have a limited impact on sound public resource management in the context of budget formulation, execution, and oversight; budget credibility; budget transparency; and good financial governance,” the report says, adding that fiscal deterioration over the past decade reflects weaknesses in the processes of policy, planning, and budget execution, with the lack of a detailed operational medium-term framework hampering planning decisions.
Entitled “Economic Institutions for a resilient Caribbean”, the 560-page document seeks to offer a viable path for Caribbean countries to improve their economic institutions and thus their economic performance.
The chapter titled “How to Improve Public Financial Management in the Caribbean” stresses that there has been no overall significant improvement in PFM in the Caribbean over the last 20 years though Guyana improved accounting, recording, and reporting with the adoption of the Integrated Financial Management and Accounting System (IFMAS).
“Budget documentation is extensive, with complete economic and financial information. Budget allocations and transfers from central to subnational governments follow set criteria and rules, but there is no consolidation of fiscal accounts by productive sector,” it laments, while reiterating that the country’s World Governance Indicators—political stability, government effectiveness, voice and accountability, rule of law, regulatory quality, and control of corruption— are below the regional average and, therefore, weak.
Procurement, the report notes, remains opaque in part because of insufficient information on procurement processes, and no information on awarded contracts which has raised corruption concerns.
It adds that fiscal performance of the Caribbean countries could generally be characterised by weak fiscal discipline that has led to growing public debt, poor budget credibility, and procyclical fiscal policy inconsistent with economic stability and sustained growth. Further, the report says fiscal responsibility legislation with medium-term fiscal performance targets is absent and no Caribbean country follows performance- or results-based budgeting, thus denying policymakers the tools to match inputs and outputs and provide the incentive structure. It adds that this results in defective departmental ownership of sectoral plans and budgets.
The authors further explain that cost overruns and serious delays on infrastructure projects and procurement irregularities have undermined budget performance, while information has been opaque at best.
Speaking specifically about Guyana, they note that in addition to these concerns a lack of effective tax revenue forecasting tools, enforcement capacity to apply penalties, and follow-up of delinquencies render the taxation system voluntary, while effective internal controls are limited, possibly because internal auditors do not have the resources needed to carry out their job.
The report notes that the Office of the Auditor General completes annual audits which are submitted to Parliament but criticized the absence of systematic and timely follow-up on the office’s findings.
“The effectiveness of parliamentary budget oversight is typically constrained by the limited time allocated to this function and these reviews are based on estimates that are not finalised and are undertaken when changes are no longer possible,” the report says.
It recommends that independent parliamentary advisory budget offices be established since insufficient time is available for legislatures to scrutinise budget proposals.
It adds that Caribbean countries may want to consider staffing these offices with professionals who are independent from government, akin to the Congressional Budget Office in the United States and the Parliamentary Budget Office in Canada or alternatively establishing a regional unit that would provide such professional services to the individual countries’ Parliaments.