The Bahamas’ Fiscal Responsibility Bill (FRB) 2018, can be compared with some standard principles that typically guide the formation of a Fiscal Responsibility Framework (FRF). Based on our examination, we conclude that the objectives of The Bahamas’ proposed FRF are clear, sound and are in accord with the typical objectives of a standard rules-based framework. We also find that the proposed FRF its embedded fiscal rules, are well designed and meet the key requirement because they will be enshrined in law with an independent oversight fiscal council to monitor and report on compliance and administrative sanctions in cases of breach.
Importantly, The Bahamas’ proposed FRF strikes a good balance between credibility and flexibility to support the deployment of counter-cyclical fiscal policies when needed. Overall, the proposed FRF is a solid one, and if implemented as stipulated in the FRB 2018, it will help to entrench fiscal discipline, enhance the budget transparency and credibility and improve fiscal accountability and overall fiscal governance.
Lessons from the implementation of the Fiscal Responsibility Legislations (FRLs) in Jamaica and Grenada suggest that The Bahamas’ FRF should be accompanied by or embedded in comprehensive Public Financial Management (PFM) legislation. The Jamaica and Grenada experiences demonstrate that strong PFM systems are integral for the smooth implementation of FRLs.
Another lesson is that public consultations are not only important prior to the design of a FRL, but they also important during its implementation. Therefore, it would be prudent for the Government of The Bahamas to hold orientation sessions for all key stakeholders to promote and entrench a new culture of fiscal responsibility, transparency and accountability.
Finally, given the inherent vulnerability of The Bahamas to natural hazards, it would be important to embed contingency provisions for natural disasters in the FRL. Indeed, explicit governance arrangements for a contingency fund for post natural disaster rehabilitation would be a welcome addition to The Bahamas’ FRB 2018 and support fiscal resilience, as well as resilience to environmental shocks. Read more here.
Dr. Allan Wright is currently an Economics Sr. Specialist at the Inter-American Development Bank, based in Nassau, Bahamas and an associate researcher for the Caribbean Centre for Money and Finance.
Formally a senior Economist at the Central Bank of Barbados and a Researcher at the Center for Monetary Studies in Latin America (CEMLA), Dr. Wright received his PhD in Economics.
Dr. Wright’s publications on growth, investment and tourism have appeared in regional and international journals. His current work lies mainly in the areas of debt and fiscal policy, forecasting, de-risking, economic growth, foreign direct investment and aspects of the real sector including tourism.