(A)

Section 13 of the Public Financial Management Act 2018 (Act 750) provides for the general principles of fiscal management as follows:

• Principal Account Holder and Principal Spending Officer of a covered entity shall be accountable to Parliament for the performance of their functions with respect to the implementation of fiscal policies. This means that the public account holders and the principal spending officers have fiscal responsibilities to honour in the discharge of their duties.
• Fiscal Policy shall be developed in a manner that takes into account the impact on the welfare of the current population and future generations. In making tax policies, spending policies and debt policies, consideration should be given to the need of current generation and the future of generation by ensuring equity and fairness in fiscal policies.
• Fiscal Policy shall be conducted in a manner that avoids abrupt changes in the evolution of macroeconomic and fiscal indicators. The fiscal goal should be to ensure economic stability within the economic and fiscal framework of the country.
• The management of public funds, assets and liabilities, including natural resources, and fiscal risks in the country shall be conducted in a prudent way, with a view to maintaining fiscal sustainability.                                                                                                                                                                                                                                                                                                                      (B)

  The Public Financial Management Act 2018 (Act 750) makes provision that guide the formulation of fiscal policy objective. The principles that guide the various aspects of fiscal policy are discussed below:

  (i) Revenue Policy: The guiding principle is that fiscal policy should ensure sufficient revenue mobilisation to finance Government programmes. This means that the revenue policy should directly or indirectly enhance the revenue of the government.

  (ii) Spending Policy: Policy relating to government spending should ensure that the fiscal balance is maintained at a sustainable level over the medium term. This implies that government spending should be linked to revenue available to ensure that the fiscal balance is within the approved levels in the national budget. This means that where revenue flows are decreasing, the government should review its expenditure to reflect the revenue situation.

  (iii) Borrowing: The policy on debt management should ensure the maintenance of prudent and sustainable levels of public debt. This means that policies to expand spending through borrowing should be considered in line with the level of debt of the country.

  (iv) Fiscal Risk: Fiscal risk refers to uncertainty of fiscal outcomes. The policy direction is to manage fiscal risks in a prudent manner to ensure that the risk does not derail the fiscal consolidation effort of government.