+Who is responsible for the planning and preparation of the budget?
The primary responsibility of the Ministry of Finance is the prudent management of the Government’s financial resources. This responsibility involves providing support and advice on the most appropriate fiscal and economic policies with the aim of maximizing sustainable economic growth and development. The development and management of Government’s budget is a major aspect of the Ministry’s function.
Even though the main responsibility for preparing the budget usually lies with the Ministry of Finance, significant input is needed from the various Ministries and entities that require government financial support. This exercise is normally controlled by the Revenue and Budget departments.
The main provision relating to Public Finance in The Bahamas is set out in Chapter IX of the Constitution. There are also other important Articles relating to Public Finance which are to be found in the Constitution under Articles 59 & 60. The Financial Administration and Audit Act and the Financial Regulations are also important pieces of legislation containing provisions relating to Financial Administration.
The budget process can be divided into five stages:
Pre-preparation stages: This is where Economic forecast of the macroeconomic outlook is done. The forecast indicates whether it is prudent for the Government to adopt an expansionary fiscal stance.
Budget formulation: This is when the Ministry of Finance puts the budget-plan together; line items amounts are determined and documented in accordance to fiscal targets.
Enactment: This is when the budget plan is debated, altered, and approved by the legislative branch of Government.
Implementation: This is when the spending warrants are issued and actual revenue collection and expenditure takes place in accordance to the budget.
Evaluation: This is when the actual expenditure and revenue collection of the budget is accounted for and assessed in accordance with the approved budget. Ongoing review of performance is a vital function to improve the efficiency and effectiveness of Government agencies. Therefore, in parallel with the work outlined above, all spending and revenue agencies are expected to review their performance in the past year so as to bring forward improvements into the current financial year. Where issues are significant, reports may be made to Cabinet.
It should be noted that the budget cycle is an ongoing process whereby continuous adjustments are made to policies and implementation in light of external and national developments affecting The Bahamas.
Macroeconomic framework – The first step in budget preparation should be the determination of a macroeconomic framework for the budget year (and ideally at least the next two years). The macroeconomic projections, prepared by the Ministry of Finance are agreed upon. This allows the Government to determine the global level of expenditure that can be afforded without adverse macroeconomic implications, given expected revenues, and the level of deficit that can be safely financed is determined.
Allocation – The second step should be the allocation of this global total among ministries, leaving room for reserves (a separate planning and a contingency reserve) to be managed by the Ministry of Finance.
Budget Circular – the third step is the preparation of a call circular which gives instructions to ministries and departments on aggregate spending ceilings for each ministry and how to prepare their estimates to be consistent with macro objectives. This circular includes information on the economic assumptions to be adopted.
Submissions – The next step is the submission of expenditure estimates and revenue forecast by agencies. Once received, the Revenue and Budget units review to test the costing and potential revenue generated by existing and any new policy proposals.
Budget Hearings– The next step comprises of the negotiations, usually at an official and then bilateral or collective ministerial levels, leading to a final agreement.
Cabinet – Finally, Cabinet endorsement of the proposals for inclusion in the budget which will go to parliament.
Parliament – This is when the budget estimates are deliberated and approved.
The budget document, according to law, is presented to Parliament the last Wednesday in the month of May.
The Budget Communication is a very important document which sets out both the domestic and international economic environment and developments of relevance to The Bahamas. It also sets out major measures which the Government intends to implement to ensure social and economic development, taking account both the external environment and domestic development. In the Communication, the Minister of Finance outlines the performance of, and prospects for, every sector of the Bahamian economy.
The Budget Communication (speech by the Minister of Finance along with the estimates), and the legislation necessary to give effect to the estimates, are debated in Parliament throughout the month of June, and approved prior to the end of June.
The “Budget” comprises of:
Estimates of Revenue and Expenditure;
The Budget Communication (the budget speech);
Appropriation bills;
Tax bills (if any),
Resolutions,
Other legislation proposed in the Budget (for example any amendments to legislations.
The debate in the House of Assembly usually takes 7 to 10 working days and then the matter is submitted to the Senate for debate.
The bills are then transmitted to the Governor General for his assent prior to June 30th. The Government Agencies are then advised on the approved Budget estimates.
