Fiscal Responsibility

new standards for public financial management
What is fiscal responsibility?
Fiscal responsibility is a term that speaks to government spending and taxation. In the simplest form, fiscal responsibility is about using taxpayer money wisely, without overspending. The idea is that government should not be able to jeopardize the fiscal health and the economic security of the country by spending more money than it has, and borrowing more money that it can afford.

The 2019/20 Budget is the first budget presented since the passage of the Fiscal Responsibility Act, 2018. This important piece of legislation reshapes the culture of public accountability, by enabling more Parliamentary and public scrutiny of the fiscal management and performance of the Government. The law establishes six general principles of responsible fiscal management and specific fiscal targets that the Government must live by when it prepares and implements the national budget.

Fiscal Targets

The overarching strategic goal of the legislation is to achieve specific fiscal objectives with respect to the deficit, government debt and growth rates in recurrent expenditure

  1. DEFICIT TARGET
    The law will force the Government to live within its means 
    The FRA requires the Government to gradually reduce its deficit so that from FY2020/21 onwards, the deficit can be no more than 0.5 per cent of GDP. 

  2. DEBT LIMIT 
    The law will lower debt to sustainable long-term levels
    The FRA requires the Government to limit government debt to a maximum of 50 per cent of GDP. The Government's Fiscal Strategy factors in annual improvements with a view to reaching the target in 2024/25.

  3. SPENDING CAP 
    The law will keep spending in line with the economy’s overall growth rate
    The FRA requires the Government to make sure the growth in recurrent expenditure does not exceed the long run growth in nominal GDP, which currently averages some 2.3% (December, 2018). 

"Our Government made a commitment to the Bahamian people that we would enshrine fiscal discipline as a core element of our transformative growth agenda. The stringent fiscal requirements of this legislation are not only groundbreaking in terms of transforming the management of our country's fiscal affairs, but they are necessary to ensure that no Government, including our own, ever repeats the disastrous fiscal performance of previous administrations."

Fiscal Responsibilty Council

Start date set for July 1, 2019

The Fiscal Responsibility Act also mandates the establishment of a Fiscal Responsibility Council, which is an independent, civil society body, comprised of five members with legal, business, economic, accounting, and financial backgrounds, respectively. These members are nominated by the Bahamas Bar Association, the Bahamas Chamber of Commerce and Employers Confederation, the University of The Bahamas, the Bahamas Institute of Chartered Accountants, and the Chartered Financial Analyst Society of The Bahamas.

ROLE OF THE COUNCIL

The core role of the Council is to foster budgetary discipline by independently evaluating the Government’s compliance with the rules and principles set out in the Act, including the general principles, fiscal responsibility principles and the fiscal objectives.  

The Council is expected to review and assess the Government’s Fiscal Strategy Report, the Mid-Year Review, the Annual Budget, and the Government’s audited annual accounts.

The thorough and complete assessment of each of these documents will serve to promote the Government’s adherence to sound fiscal decisions that take into account the economic impact they will have on the economy.      

INDEPENDENCE OF THE COUNCIL

  • The Council will have access to all government information and all public servants in the fulfillment of its mandate.  
  • The Council will report directly to the Bahamian people through its direct submissions to Parliament.  
  • The deliberations and the reports of the Fiscal Responsibility Council will not be subject to any direction or intervention by any public officer or elected official.