10 May 2023 08:22 am Views - 787
In a bid to bring in much needed fiscal discipline, the Government will introduce a new Public Financial Management Act (FMA) equipped with binding fiscal rules, which is set to come into effect with the budget 2025.
|
Bandula Gunawardana |
President Ranil Wickremesinghe in his capacity as the Minister of Finance, Economic Stabilisation & National Policies on Monday sought the approval of Cabinet Ministers to initiate the necessary steps to introduce a new Public Financial Management Act to be implemented with the 2025 budget, and simultaneously to repeal the Financial Management (Responsibility) Act (FMRA) No. 3 of 2003.
Although, the FMRA has been in place for nearly three decades, Cabinet Spokesperson Minister Bandula Gunawardana pointed out that successive governments have never complied with the fiscal targets stipulated in the Act, which ultimately resulted in the current economic crisis.
Under the FMRA, the fiscal deficit was to be maintained below 5 percent of GDP while maintaining public debt at 65 percent of GDP and public guaranteed loans at 4.5 percent of GDP.
In contrast, Gunawardana noted that the budget deficit shot above 10 percent of GDP while public debt and public guaranteed loans reaching 125 percent and 15 percent of GDP at present.
The proposed FMA is set to include measures when the government could deviate from fiscal rules under extreme conditions in order to bring the public finances back to compliance.
“The Act provides for non-compliance with State’s financial rules only with the approval of parliament in extraordinary cases. However, the Act does not include provisions for deviating from those terms.
The Act does not specify the measures to be taken in the event that the set goals cannot be met in accordance with the provisions of the Act,” the Government Information Department said.
The proposed FMA is also a key condition of the International Monetary Fund’s Extended Fund Facility.