Five-pronged solution proposed to improve national budget practices

• Verité Research calls for a more transparent approach to budget proposal formulation
• Says budget policies are framed in a manner govt. cannot be held accountable
• Warns SL’s development path needs immediate rectification of national budget issues

By Shabiya Ali Ahlam
Successive governments have failed to come up with a citizens’ budget that entails the necessary insights for the public to understand the viability of the proposals made and to break this recurring inefficient cycle, economic think tank Verité Research stresses the need for the relevant authorities to take up a more transparent approach in its proposal formulation, backed by proper analysis and research.

Acknowledging that Sri Lanka continues to misinterpret the annual budget, regardless of the regime in power, Verité Research Executive Director Nishan De Mel warned that failing to rectify the issues revolving around the budget policies would lead the country to fall well behind even the underdeveloped nations as time progresses.

“Better formulations, better controls will lead to better implementation and a more efficient delivery and utilisation of promises and public funds. A credible and professional budget is what we want. Sri Lanka is not going to proceed on the developmental path without trying to get there,” stressed De Mel.

He pointed out that with insufficient information being disclosed to the public to hold the government accountable, Sri Lanka has even been taken over by Uganda in the Open Budget Index score. 

Sri Lanka had a score of 44 out of 100, as of 2018, a drastic drop from a score of 67 achieved in 2010, since when a steady decline was witnessed. Meanwhile, Uganda that scored 55 in 2010 saw a steady improvement over the years, reaching a score of 60 in 2018.

“Looking at Sri Lanka over the years, we have thought we are superior compared to Africa and South Asia. However, in most indicators and performance in certain metrics of efficiencies, we look like the weaker child and are being overtaken,” De Mel told a recent forum titled ‘Improving National Budget Practices’, in Colombo.

In a bid to have a “professional” government, one that is open to being held accountable, the senior economist put forward five areas that require emphasis to witness any real improvement.

The first is to back the proposals and estimates with analysis. The government should look at having at least a three-page analysis for each proposal, one that consist of detailed estimates of the calculation, sensitivity and scenario analysis of estimates, feasibility of the project  and the identification of risks and mitigation strategies.

Second is to enhance information disclosure, where the information unveiled must be consistent and comprehensible. Information that needs to be disclosed should include the estimates of expenditure arrears, in-year reports and sensitivity analysis of macro assumptions. Moreover, de Mel stressed that consistent formats should be followed in the disclosures and significant deviations should be explained. Third is to limit the discretionary budget. For this, Verité calls for the establishment of a ‘negative list’ of items, which cannot be included under discretionary spending, such as vehicles. The think tank suggested the implementation of a 2 percent limit on the discretionary budget to ensure 
it is not misused.

Fourth is to extend the budget timelines for the preparation of estimates and for the approval and scrutiny of the budget 
in Parliament. The final proposal was to establish a Parliamentary Budget Office (PBO) that will provide technical, reliable and non-partisan analysis of budgetary reports to the public. The PBO should be established to support the Public Finance Committees and MPs in Parliament as well, he said.

According to De Mel, the benefits of having such an establishment would bring about continuous improvement in public finance reforms. 

In addition to enhancing the credibility of the budgets and fiscal policies, by offering an independent expert opinion on fiscal policy, a PBO would enhance the approval and oversight role of Parliament as well.