10 December 2021 09:42 am Views - 1104
The credibility of the government is significantly undermined as authorities continue to fail in adhering to the governing fiscal law of the country, the Colombo-based economic think-tank Verité Research said in their latest report.
While the Fiscal Management (responsibility) Act (FMRA) of 2003 was enacted to ensure that the principles of responsible fiscal management are entrenched within the legislative discipline, the budget deficit as a share of GDP has consistently remained above the set limit of 5 percent of GDP, the think tank pointed out.
Even for 2022, the proposed budget deficit is 8.8 percent of GDP, which is well above the legally allowed limit.
The FMRA essentially provides for measures to enable the public to actively investigate, scrutinise, and oversee the country’s fiscal policy and its performance.
“The regular violations of the law and changes to the law to accommodate fiscal profligacy are an erosion of the credibility of the executive. Furthermore, these violations and changes also undermine the credibility of the very institutions that are meant to provide credibility,” Verité Research said in their Public Report on the 2022 Budget.
The report asserted that Parliament has a responsibility to ensure that the executive is held accountable for such transgressions.
The FMRA also sets a limit on the total liabilities of the government—the country’s total debt.
The initial Act in 2003 specified limiting total liabilities, including domestic and external debt at the current exchange rate, to 85 percent of GDP by end of 2006. It further specifies that total liabilities should not exceed 60 percent of the estimated GDP by the end of 2013.
However, this limit was increased through an amendment to the Act in 2013. The initial limit set at 60 percent was increased to 80 percent in 2013 and the 60 percent limit was extended till 2020.
Since the 2020 timeframe was breached, in June 2021, the FMRA was further amended to extend the central government debt limit of 80 percent of GDP till 2030.