Budget Credibility and Execution Essay

Credibility is the quality or state of having trust in someone or something. The issue of budget credibility is one that has percolated for quite some time in the international financial community. The differing views on this issue have resulted in different approaches to budgeting from country to country (Mustapha, 2019). In the past, the international community has been united in support of fiscal transparency through public reporting, but elements of fiscal credibility have received more mixed reactions (ElBerry, and Goeminne, 2021).This report scrutinizes credibility of budget and how the guidelines of Public Expenditure and Financial Accountability on credibility of budgets can be used to improve the execution of budgets.

Guidelines of public expenditure and financial accountability

The following are guidelines of Public Expenditure and Financial Accountability on the credibility of budgets:

1. Budget deficits are allowed to a certain extent, as long as the country has an overall surplus.
2. A budget deficit is permitted only when a Notwithstanding Clause exists.
3. The government shall not spend more than the current year’s income to avoid making unnecessary debt payments that may cause future economic crises or financially limit its ability to operate effectively in emergencies (Arnold and Artz, 2019). The accountability guidelines will apply to both current and new subsidies and tax cuts etc., concerning fiscal management standards, issuance expenses, public debt, revenues, and total spending of every budget item
4. A country’s fiscal policy is based on the principle of a balanced budget, although the budget deficit to support economic growth is more appropriate.
5. The government shall take accountability into consideration when preparing the budget cash flow figures, which will be based on income and expenditure forecasts for three years, such as:

Income estimation under the following:

1. When implementing these guidelines, we must ensure that they apply at all levels through a combination of laws and regulations and legal institutions and mechanisms to combat illegal activities.
2. The government must implement these guidelines to ensure that the country’s financial resources are directed to the right place (Arnold and Artz, 2019). They must be publicized to promote transparency and accountability and increase public awareness.
3. Public expenditure and accountability do apply immediately and be used every month, depending on the time of year, so that it will not affect the preparation of the annual budget under Article 107 of the constitution (Arnold and Artz, 2019).
4. Any person has a right to access these guidelines and receive information about them in these rules.

How to improve the execution of the budget

The following practices should be considered in improving public-sector budget execution:

Transparency: The State-owned enterprises are under scrutiny for the first time. This scrutiny can strengthen their credibility and confidence, reflected in their budgetary performance. The Auditor-General would like to see the development of an internal audit function in these enterprises that would check their accounting systems (Duda and Szulc, 2018). In addition, these companies are not subject to parliamentary audits. Therefore, they should make their financial statements public so that this scrutiny will also increase.

Increase the Budget Function: The budget is the final policy statement of the government. It provides a framework for government resources to be channeled to achieve the national priorities of its people. Adopting a more effective budget policy will aid enhance the efficiency and effectiveness of public expenditure. Therefore, Treasury and other key ministries must enhance their budget functions, which may include strengthening the capabilities that underpin these functions at an organizational level and developing incentives for departments and individual managers to focus on achieving budgetary objectives (ElBerry and Goeminne, 2021). This can be done by improving accounting systems, benchmarking performance against similar organizations or institutions with similar activities, and enhancing managerial skills in this area, as some departments have demonstrated a high level of skill in managing projects in different sectors.

Bibliography

Arnold, M. and Artz, M. (2019) ‘The use of a single budget or separate budgets for planning and performance evaluation’. Accounting, organizations and society, 73 (C), pp.50-67.

Duda, J. and Szulc, A. (2018) Credibility evaluation of income data with hierarchical correlation reconstruction.arXiv preprint arXiv:1812.08040. Web.

ElBerry, N.A. and Goeminne, S. (2021) Fiscal transparency, fiscal forecasting and budget credibility in developing countries.Journal of forecasting, 40(1), pp.144-161. Web.

Mustapha, S. (2019) Budget credibility, fiscal outcomes, and PFM performance in fragile and nonfragile countries.PEFA, Public Financial Management, and Good Governance, p.61. Web.