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Business Senator, Albert Rep, Economists: Supplementary Budgets so early in fiscal year is a concern

Business Senator Kevin Herrera, Albert Area Representative Hon. Tracy Panton, and Economics lecturer Dr. Phillip Castillo have all told The Reporter this week that a supplementary budget coming so soon after the start of the new fiscal year is a legitimate concern.

Senator Herrera told The Reporter on Thursday that while he would not impute any improper motives as to why supplementary provision is being utilized, he said he has concerns regarding the planning being conducted at the ministry and departmental levels.

“I think many of the ministries and departments really do not take the budgeting process seriously,” opined Herrera, citing an example he had previously raised regarding the Ministry of Defense. Herrera also stressed that a few line items are genuinely things that could be considered as unforeseeable, but many other new expenditures are very predictable things.

Herrera also pointed out that while the official budget debated at the start of the fiscal year is expected to show certain fiscal indicators, including primary balances, which take into account revenues and expenditures, the same is not the case with the supplementary appropriations.

“I think it is incumbent on the government to show certain balance with respect to revenues and expenditure,” said Herrera. “They definitely would want to show a surplus at that time, or at least show that they are very close and that the budget looks positive; however, when they do the supplemental budgets, there is no such requirement…there is no corresponding revenues. … Instead, these supplementary budgets are looking at expenditures in isolation.”

Herrera’s comment speaks to the fact that at the start of the fiscal year, certain fiscal indicators are highlighted. Among them is the primary balance, which is the difference between total revenues and total expenditures (less interest charges). In March, the Approved Estimates tabled in the House of Representatives reported a primary surplus of 0.39 percent of Gross Domestic Product (GDP). However, if the recent Supplementary Appropriation of $69 million was included in the already approved expenditure ($1.496 billion), the primary balance would turn to a deficit equivalent to 0.71 percent of GDP (-$44.5 million).

For her part, Albert Area Representative Hon. Tracy Panton likewise questioned the budget process management.

“While we cannot say this is done intentionally, something is definitely wrong in the budget management process,” said Panton, who, like Herrera, accepted that some of the new expenditure items are indeed things that could be classified as “unforeseeable,” but most of the other areas are spending that should have been planned beforehand.

University of Belize Economics Lecturer Dr. Phillip Castillo also spoke with The Reporter saying the amount so soon after the start of the 2023/24 fiscal year is indeed something to monitor, as it may speak to management shortcomings at the technical level.

Budget Variances

The budget planning process is one that Senator Herrera had criticized during the April budget debate when he highlighted the large budget variances found across fiscal periods.

Speaking back in April, Herrera opined that while some variance is expected in any budget process, international convention usually considers variances (i.e., the difference between actual spending and what was budgeted for) of 10 percent or more to be worthy of investigation.

According to Herrera, 15 out of 25 major budget headings had budget variances outside that 10-percent threshold.

Nine of those programs had "unfavorable" variances, meaning they overspent their budgets. Herrera zeroed in on the nine that overspent by variances above 10 percent, with the Ministry of Rural Transformation, Community Development, and Labour being as high as 36 percent, spending more than $5.4 million over what was originally estimated.

Among this group, the average overspending was about 17 percent for FY 2022/23.

On the under-spending side, several departments and ministries spent notably less than was budgeted.

The average “favorable” variance is -12 percent. Here, Herrera had made the point that if this type of thing was being better monitored, there would have been less need for the government to come to the National Assembly for supplementary allocations.

In Fiscal Year 2022/23, the numbers show that nearly $60 million in Recurrent Expenditure was under-spent. Those are monies that could have been used for needed capital expenditure, explained Herrera in April this year.

If reallocated, $60 million could have reduced the need for at least some of the supplementary appropriation acts tabled last fiscal, a year in which four Supplementary Acts totaled more than $180 million.

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