- 10 Marks
Question
Budgeting is an important process by which government plans its programmes and activities for a given fiscal period. For a budget to be effective in the delivery of the economic and social agenda of the government, the budgeting process should be linked to the macroeconomic and fiscal policies of the country. No wonder the Public Financial Management Act, 2016 (Act 921) has made extensive provision on macroeconomic and fiscal policies to guide the government in its budget formulation and execution. The budgeting process is preceded by fiscal policy planning to serve as a foundation for the realization of the inspiration of the budget. A national budget is a means to an end and not an end in itself; therefore, it should be controlled and managed holistically to achieve the desired economic, fiscal, and social outcomes. The Minister of Finance, the Principal Account Holders, and Principal Spending Officers are actively involved in post-budget management and control activities at various levels to ensure that the budget targets are achieved.
Required:
i) Explain the primary fiscal policy objective of the government and identify THREE (3) guiding principles in the formulation and implementation of a fiscal policy objective.
(3 marks)
ii) Explain FOUR (4) post-budget management and control activities prescribed under the Public Financial Management Act, 2016 (Act 921).
(4 marks)
Answer
i) Primary Fiscal Policy Objective and Guiding Principles
- Primary Fiscal Policy Objective:
The primary fiscal policy objective of the government is to ensure macroeconomic stability within the macroeconomic and fiscal framework of the country. This involves maintaining a balance between revenue mobilization and expenditure, controlling public debt, and achieving sustainable economic growth. - Guiding Principles:
- Sufficient Revenue Mobilization: Ensuring that enough revenue is mobilized to finance government programs and projects without excessive borrowing.
- Maintenance of Prudent and Sustainable Levels of Public Debt: Managing public debt in a way that does not jeopardize fiscal stability and economic growth.
- Efficiency, Effectiveness, and Value for Money in Expenditure: Ensuring that government expenditures are managed in a way that maximizes output and achieves the best outcomes with the resources available.
- ensuring that the fiscal balance is maintained at a sustainable level over the
medium term.
ii) Post-Budget Management and Control Activities
- Mid-Year Review:
A mid-year review is conducted to assess the performance of the budget in the first half of the fiscal year. This review helps identify any deviations from the planned budget and allows for adjustments to be made to ensure the budget remains on track. - Budget Performance Report:
Regular budget performance reports are prepared to track the progress of budget implementation. These reports provide insights into how well the budget is being executed and highlight areas that may require corrective actions. - Supplementary Budget:
In cases where the initial budget is insufficient to cover all government activities or unforeseen circumstances arise, a supplementary budget may be introduced to allocate additional resources. - Virement and Reallocation of Funds:
Virement involves the reallocation of funds within the budget to different expenditure items based on changing priorities or unforeseen needs. This ensures that funds are utilized efficiently and in line with government priorities. - Cash Forecasting:
Regular cash forecasting is conducted to ensure that sufficient cash is available to meet the government’s obligations. This involves predicting cash inflows and outflows to avoid liquidity issues.
- Topic: Public sector fiscal planning and budgeting
- Series: MAY 2019
- Uploader: Kwame Aikins