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Budget Office potential

Comments / 372 Views / Monday, 14 August 2017 00:01

Policymaking is a difficult and often tricky thing to do because it affects many people and can have unexpected ramifications. This is why many countries have nonpartisan budget offices that formulate long-term policies to anchor the economy and ensure research-based decisions are made. Sri Lanka may finally be taking tentative steps in this direction.    

In the US for example, the Congressional Budget Office (CBO), a nonpartisan government agency, calculates the potential impact of political decisions. One of the main reasons why US President Donald Trump’s key domestic pledge to repeal and replace Obamacare is still dead in the water is because the CBO calculated potential tax cuts would deprive an estimated 20 million people of healthcare.

Republican efforts have been plagued by party infighting and vigorous opposition from the medical and hospital industries, which say the bill would harm groups including the poor, elderly, sick, disabled and those struggling with addiction. The CBO has also pointed out federal spending on Medicaid would be cut by more than $ 700 billion over the next decade, which would disproportionately benefit the richest 1% of the country.

This is not strictly a budgetary decision but it underscores the need for data in policymaking. Such data is essential for the public to understand how the decisions their representatives make impact them. Sri Lanka’s budget-making is more a process of rote than genuine apolitical, research-based decision-making. In the middle of the year ministries send along their funding needs to the Finance Ministry and business chambers also pitch in with their expectations, sometimes through private influence. A compendium of this is read out in Parliament in October and subsequently passed. No wonder budgets are often criticised for inconsistency and fail to direct the economy competently because they are subject to political agendas and other circumstantial changes. 

Sri Lanka’s budget process has been routinely derided as one of the worst, even by regional standards with no evaluation on whether promised allocations are distributed, especially to key education, healthcare and housing sectors. Budget accountability is so low the public often have no idea if they have been given what was promised. Policies and taxes announced in the Budget often go unimplemented or partially done. The public are only brought into the process when it is to the political advantage of the Government. During election season, microeconomic needs are ignored in favour of winning votes.        

Hoping to change some of this, Cabinet last week approved the establishment of a Parliament Budget Office (PBO) tasked with independent and non-partisan analysis of budget cycles and financial proposals.

The objective of the PBO would be to provide services and facilities to Parliamentarians, to provide independent and non-partisan analyses of budget cycles, fiscal policy and financial proposals. The Legal Draftsman’s office has been tasked with preparing the Bill to establish the office under the guidelines spelt out in the Prime Minister’s proposal.

Once established, the office will be responsible for preparing policy costing and conduct research and analysis of the budget and fiscal policy settings. If given independence, leadership and resources the PBO has the potential to fill a huge information chasm and possibly improve State finance operations in the future. 

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