What is the Budget Debate?
The Annual Budget indicates what will be done with the finances of the country over the course of a year. The purpose of the Budget is to decide how much money the Government plans to expend on security, roads, water, housing and other services it provides.
Budget Debate Explained
The Budget Debate provides the Government with the opportunity to take stock of its performance over the previous fiscal year, to measure its progress in relation to the targets previously set and to assess the effectiveness of its management of the country’s finances.
It is opened by the Minister of Finance who outlines how the various programmes and policies of the Government will be financed and how the money will be raised. The Minister then presents Government’s expenditure and revenue estimates for parliamentary approval at the start of each financial year (April to March of the following year). They are organized by public service into what is termed Heads of Estimates, and reflect government’s development policies and priorities. The Budget is prepared under the direction of the Financial Secretary.
The Budget Debate usually begins after months of intensive planning by financial experts. Such planning needs careful attention, since it decides the welfare of the nation for the next 12 months and might even have important effects for the following years. The Government is always faced with the problem of getting the maximum benefits out of its limited resources. During the Budget Debate, Ministers report on the work done in government departments under their portfolios, and outline plans for the coming financial year.
The Minister of Finance, who presents the Budget and opens the debate, also has the privilege of speaking last, as he closes the Budget Debate. After the Minister of Finance has presented the Budget and made his opening address, the House of Representatives create the Standing Finance Committee to study the Budget and make recommendations. When the Debate closes, the House passes an Appropriation Act, which gives the Government the authority to operate the Budget. After the House of Representatives has passed the Appropriation Act, the Act goes to the Senate for approval.
The Debt Management Strategy of the Government of Jamaica is an annual publication of the Ministry of Finance and the Public Service that provides information on the Government’s debt management objectives, policies, plans and strategies for the fiscal year and the medium term. Financial Statements and Revenue Estimates (FSRE) Memoranda on the Budget: http://www.mof.gov.jm/budgets/budget-memorandum.html
Here is a list of key terms and their meanings used during the Budget Debate:
- Recurrent Expenditure: The recurrent account contains all the expenses that accrue in the carrying-out of services normally rendered by Government. Some of these expenses include wages and salaries of Government employees, and the upkeep of offices, factories, warehouses and farms. The recurrent account also contains an estimate of the revenue expected from taxes, such as import duties, income taxes, property taxes, licences, and consumption duties.
- Capital Expenditure: The capital account includes expenses connected with the purchase and upkeep of goods such as machinery in factories, school buildings, offices and roads. These projects are expensive, but they in turn help, in the production of other goods and services. The capital account, therefore, plays an important part in the country’s economy, for as the stock of capital goods grows, production capacity increases. The capital account also includes income from Government owned profit-making enterprises and loans of various kinds.
- Appropriation Act is the law that gives the Government the authority to spend money for the activities outlined in the Estimates of Expenditure.
- Estimates of Expenditure is the legal financial document which provides details on the amount of money the Government intends to spend during the fiscal year. The estimates of expenditure include allocations to the government ministries, departments and agencies.
- Fiscal Policy is the measure used by the Government to manage the National Budget and to influence macro-economic outcomes.
- International Monetary Fund (IMF) is the international organisation responsible for monitoring the system of exchange rates between countries. While ensuring the stability of the international monetary system and to monitor.
- Extended Fund Facility (EFF) is an IMF loan agreement that establishes a three to five year period of support for a country’s Balance of Payments.
- Government Revenue is the amount of money the Government expects to earn or raise in order to finance public expenditure.
- Recurrent Revenue is revenue earned from taxes as well as non-tax sources such as court fines, interest earned on investments, etc.
- Capital Revenue is the revenue raised through royalties, sale of land, divestment proceeds and external loans.
- Consolidated Fund is the primary account to which all Government revenue is deposited and from which expenditure, through warrants is withdrawn.
- Warrant is the written authority over the signature of the Minister of Finance and the Financial Secretary, authorising the Accountant General to transfer money from the Consolidated Fund to the various Government accounts listed in the warrants.
- Multilateral Loans/Grants represents funding from international financial institutions such as the World Bank, the IMF and the Inter-American Development Bank (IDB)
- Bilateral Grants represents funding from other governments
- National Debt Exchange is an exchange of debt instrument between the government and its creditors. The main debt investment instruments are government bonds. In the debt exchange process the borrower will offer the bond holders the opportunity to exchange existing old bonds for new bonds.
- Public Debt is the total amount of money owed by the Government.
- Debt Service Payment involves the payment of principal and interest charges on loans.
- Treasury Bills are short term financing instruments used to meet Government cash flow needs.
- Monetary Policy is the economic measure employed by the Bank of Jamaica (BOJ) to monitor interest rates and the amount of money in circulation.
- Contingencies Fund is a fund established by the Constitution of Jamaica for use in emergencies such as natural disasters.
- ‘Capital A’ Projects are funded solely from revenue obtained from taxes.
- ‘Capital B’ Projects are funded by revenue from taxes and multilateral and bilateral loans and grants.
- Budget Memorandum provides a summary review of the macro-economy, the performance of Central Government’s Budget in the immediate past Financial Year as well as the aims/objectives of the new Central Government Budget. It also reviews the activities of the Public Sector Entities and the Selected Projects performance.
- Budget Presentations are speeches and presentations to parliament each fiscal year.