Public Hearings on the Draft Money Bills
Amendment Procedure and Related
Matters Bill, 2008
Submission to Portfolio
Committee on Finance
By
Tania Ajam: Knowledge Director
Juan Bester: Programme Manager
5 August 2008
2
Background
 AFReC’s 2000 recommendations:
• introduce a phased approach to budget
process with parliamentary oversight at
each stage
 General and specific recommendations
3
Recommendations (1)
 General:
• Bill needs distinction between macro-economic
forecasts and fiscal policy targets.
• Macroeconomic forecasts to be validated by
independent agency.
• Parliament to adopt fiscal rules framework for
considering budgets:
• consideration of criteria targeting, efficiency, effectiveness,
economy, transparency, zero sum gains and losses, internal
consistency, time consistency, and broad stakeholder
consultation.
• Stronger emphasis on stakeholder consultation.
• Parliament to exhaust all reasonable avenues before
amending budgets.
4
Recommendations (2)
 Specific:
• Refine “fiscal framework” definition: rolling 3-year
forecasts
• Sections 5(1) and 5(2) of the Bill to be rewritten to
read “medium term statements.”
• Section 7(9) report to include medium term fiscal
impact of proposed amendments + outline of
reconciliation of proposed amendments relative to
initial proposals from NT.
• Section 7(9) report to note list of stakeholders to be
consulted when considering amendments.
• Budget Office adequately resourced + capacitated.
• Budget Office’s mandate and performance criteria may
need to include explicit focus non-partisanship +
objectivity.
5
Establishing fiscal rules (1)
 Research shows that fiscal rules necessary to
maintain fiscal discipline when economies are
vulnerable, not prone to macroeconomic
stabilisation.
 Fiscal framework with methodologies
 Examples: borrowing for capital assets but
not for current consumption, referendums for
drastic tax hikes, number + size of
amendments, ratio of government
expenditure to GDP, balanced budgets
 International case studies
6
Establishing fiscal rules (2)
 Need for amendments to take into
account budget trade-offs.
 Allocative efficiency: maximise citizen
welfare with current resources, not
indebting future generations.
 Operational efficiency: need for properly
planned budgets, minimising cost of
marginal output.
7
Establishing fiscal rules (3)
 Criteria for fiscal rules framework:
•
•
•
•
Effectiveness, economy, and transparency
Zero sum gains and losses
Internally consistency
Time consistency
Circumspect use of amendments
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 Appropriation amendments should be seen as
a last resort measure.
 Rather then changes with current MTEF
period.
 Compelling rationale necessary, in terms of
improved allocative + operational efficiency,
fiscal discipline, or fiscal accountability
 Risk considerations by Parliament, e.g.
potential absorption capacity by organs of
state, potential underspending and rollovers
could be avoided.
 Fiscal rigidities (e.g. personnel wage
structures, social grants) leaves little fiscal
discretion for changes in short term.
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Parliamentary Budget Office
 Good idea, but imperative that it is:
• Dedicated
• Properly resourced + capacitated
• Non-partisan + independent
 Critical success factor: clarity in roles of
Executive Authorities and Accounting
Officers to relieve tension between the
Parliament’s oversight function and its
ability to amend budgets.
END
THANK YOU
Website: www.afrec.co.za
E-mail (1): [email protected]
E-mail (2): [email protected]
Telephone: 021 659 9300/10/19