Acknowledging improvements to the quarterly reporting by 13 state-owned entities (SOEs), the Fiscal Responsibility Oversight Committee (FROC) notes that government has yet to fulfill all the requirements under the Fiscal Responsibility Act (FRA).
The 2019 FROC report, which was tabled in the House of Representatives at its July 29 sitting, acknowledges a “steady improvement” in quarterly reporting by SOEs and the monitoring of their contingent liabilities.
“The fiscal data provided by the Macroeconomic Policy Unit (MPU) still includes only that of Central Government. Most targets were met in 2019 but based on Central Government data only. This has therefore given rise to the cautious assessment in the majority of the targets as the Act is very clear that the data used must include not only Central Government but also ‘covered public entities’.”
Under the FRA, a SOE or statutory body has received transfer or guarantees from government in the last five years, has not met quarterly reporting requirements for three consecutive quarters in the last year or has recorded negative equity on its audited balance sheet in the last three years. The committee noted improvements in tax collection increases through reinforced compliance; expenditure containment through wage bill restraint and an under-implemented Public Sector Investment Programme; as well as reductions in the central government debt and guaranteed debt.
However, the committee warns that contingent liabilities of statutory bodies and state owned enterprises can become current liabilities of government “given a crisis” as they “can be faced with revenue and cash shortfalls, and the government may have to increase transfers to them or service their debts.”
The 60-page report, which will be examined by the Public Accounts Committee, the Standing Orders Committee and the Standing Committee on Finance of Parliament, repeats observations from previous FROC submissions that “highlighted the need for significant amendments to the FRA in order to strengthen the Act by removing ambiguity and ensuring consistency with other legislation.”
“While extensive discussions were held with the MPU and the International Monetary Fund on proposed amendments and consensus was reached on the way forward, the amendments are yet to be submitted to Parliament for consideration,” according to the report.
The committee reiterated its recommendation that “an assessment of all relationships between public and private entities” be conducted to accurately ascertain the “true status of any possible Public Private Partnerships (PPPs) and related contingent liabilities.”
Section 8(3) (a) states: Where the ratio of public debt to GDP for the preceding year reaches fifty-five per cent; the Minister shall take appropriate steps to ensure that the targeted primary balance shall be a minimum of three point five per cent of GDP.” The committee “confirms compliance with reservations as data for covered public entities was not included in calculating this ratio. The MPU has indicated intent to correct this deficiency in the medium-term.”
The following 13 entities are referenced in the FROC 2019 report: Child Protection Authority, Financial Complex Limited, Grenada Investment Development Corporation, Grenada Bureau of Standards, Grenada Cultural Foundation, Grenada Food and Nutrition Council, Grenada National Stadium Authority, Grenada Postal Corporation, Grenada Tourism Authority, Spice Mas Corporation, Public Utilities Regulatory Commission, T.A. Marryshow Community College, and the Marketing and National Importing Board.
“The data submitted by the Macroeconomic Policy Unit for the preparation of this Report does not capture that of the covered entities as required by the Act. This omission has given rise to the caution applied in the assessment of a number of Rules and Targets. However, the MPU has made progress in building a full data set for covered public entities; and the FROC trusts that this short coming will be rectified in 2020,” the 2019 report states.
The FROC comprises Richard Duncan, chair; Zana Barnard; Shadel Nyack Compton; Anthony MacLeish and Philbert Charles.