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Public Expenditure Review Commission
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Background

  National Consultations of the Public Expenditure Review Commission
Updated 22 November 2011

Terms of Reference
Role of the Commission
Composition and Meetings
Operations of the Commission
Institutional Support for the Commission
Role of Research Staff and Administrative Assistant
Links To Related Research Work
Frequently Asked Questions


Background
Efficient fiscal policy is a prerequisite for macroeconomic stability and economic development. This is being addressed under the Fiscal Reform Programme, which is a component of the Eastern Caribbean Currency Union (ECCU) Eight Point Stabilisation and Growth Programme. The Fiscal Reform Programme aims at improving the efficiency of the fiscal regimes in the ECCU. In particular, member countries are encouraged to generate or increase their level of domestic savings to facilitate economic growth and development.

Most of the member countries of the ECCU have implemented tax reform programmes which have contributed to growth in government revenues. However, the countries are faced with rigid expenditure structures and rising government expenditures. This has contributed to high fiscal deficits and the accompanying increases in public sector debt with some countries recording debt to GDP ratios above 100 per cent. The member countries have agreed to reduce their debt levels to achieve a debt to GDP ratio of 60 per cent by 2020. Thus, there is an urgent need to address the growth in government expenditures, based on consensus on the role of government in the economies of the currency union.

In this context, the Monetary Council, at its meeting on 8 February 2008 recommended the establishment of the Public Expenditure Review Commission (Expenditure Commission) to investigate and make recommendations on appropriate ways of rationalising the form and functions of public sector expenditure in the member countries of the currency union. At its meeting on 16 July 2010, the Monetary Council approved the Terms of Reference of the Commission. top ^

Terms of Reference for the
Public Expenditure Review Commission

Role of the Commission

It is proposed that the Expenditure Commission be composed and operate in a manner similar to that of the Commission on Tax Reform and Tax Administration Reform. This involves the holding of consultations with representatives of the public and private sectors throughout the Currency Union to obtain input on the critical issues relating to public expenditure reform.

The Commission would:

  1. Examine and make recommendations on the role of Government in the ECCU under the umbrella of the Economic Union.
  2. Examine the expenditure structure and trends in the ECCU.
  3. Examine the experiences of countries that have undertaken expenditure reforms.
  4. Identify best practices in expenditure reform programmes.
  5. Review the political, economic and financial context of expenditure reform in the ECCU.
  6. Identify areas for cost sharing among the countries of the ECCU.
  7. Identify programmes that could be privatized.
  8. Make recommendations for improving the efficiency of government expenditures.
  9. Make recommendations on the operational efficiency of the public enterprises.
  10. Develop a medium term fiscal framework to ensure fiscal sustainability.

Composition and Meetings
 

The Commission consists of six eminent persons from the ECCU. The Chairperson of the Commission is Mr Marius St Rose.

The members of the Commission and their country origin are as follows:

  Mr Marius St Rose Saint Lucia
  Ambassador Wendell Lawrence St Kitts and Nevis
  Professor Simon Jones Hendrickson St Kitts and Nevis
  Mr Swinburne Lestrade Dominica
  Dr C Justin Robinson St Vincent and the Grenadines
  Mr Clarvis Joseph Antigua and Barbuda
     
  The Commission intends to have seven meetings roughly six weeks apart and alternating between face-to-face and video conferences. top ^

Operations of the Commission

 

The Commission would:

  1. Determine the frequency of its meeting.
  2. Determine objectives and structure of the Final Report.
  3. Based on the structure of the Report, identify and assign areas of research either among the Commissioners or through consultancy.
  4. Discuss the issues identified at the regular meetings of the Commission.
  5. Hold discussions with representatives of the public and private sectors throughout the Currency Union to obtain input on the critical issues.
  6. Consult with the Financial Secretaries and the Committee of Accountants General, Directors of Audit and Directors of Budget.
  7. Document deliberations throughout the Currency Union to provide a basis for the Final Report.
  8. Circulate the Draft Report to member governments and discuss the Draft Report in consultations with representatives of the private and public sectors.
  9. Present the Draft Report, together with input from the above consultations, to the Monetary Council.
  10. Prepare a Final Report and present it to the Monetary Council.

Institutional Support for the Commission
  The ECCB would provide institutional support for the Commission. Meetings organized by the ECCB namely those of the Accountants General, Directors of Budget, Directors of Audit, Coordinators of the Policy Units and the Financial Secretaries would be utilized to discuss technical issues, and where necessary provide technical support to the Commission in undertaking research.

Role of Research Staff and Administrative Assistant

 

The Research Department of the ECCB would provide technical support to the Commission in undertaking research on issues identified by the Commission. Secretarial support to the Commission would be provided by the ECCB. The Administrative Assistant, designated Secretary to the Commission, would consult with the Chairperson of the Commission on:

  1. Notification of Meetings
  2. Preparation of Agenda
  3. Preparation for Meetings
  4. Preparation and Circulation of Minutes

The Administrative Assistant would also undertake other duties as assigned by the Chairperson of the Commission. top ^


Frequently Asked Questions

 

Do you really need a Commission for investigating and making recommendations on rationalising expenditure?
The formation of the Commission is a parallel attempt to: involve independent and professional expertise from the Eastern Caribbean Currency Union (ECCU); take a comparative national and regional approach to expenditure reform; inform stakeholders about major expenditure issues and seek their views or inputs on ways of rationalizing public expenditure; and last but not least to take a holistic approach to policy formulation in the ECCU.  Continual studies have been conducted by international institutions and research bodies on expenditure systems across the world, and it is essential to establish a Commission to review those studies in order to identify the best (and worst) practices wherever relevant and applicable.  Furthermore, through the Commission, there can be intense deliberations and discussions to get consensus on recommendations for public expenditure reform.

What will the report of the Expenditure Commission cover?
The final report of the Commission will cover a number of theoretical and practical topics on government expenditure and expenditure administration reforms in the ECCU.  The chapters of the final report will deal with a number of areas such as: the impact of government expenditure; the ideal government expenditure arrangement; existing government expenditure levels and arrangements in the ECCU; weaknesses in the existing government expenditure arrangements and practices in the ECCU; comparative government expenditure, practices and arrangements; generic operational measures to enhance expenditure effectiveness; transitioning arrangements; and costs and benefits of steady state arrangements.  The report will also provide recommendations and outline a way forward for public expenditure reform in the ECCU.

Will the Commission provide country specific or general recommendations in its report? 
The recommendations of the Commission would not be country specific but would focus on regional approaches.  Best practices in certain countries will be highlighted in the final report of the Commission.

How could the Commission make a more meaningful contribution if it does not recommend ways to cut expenditure?
The Commission will not recommend changing governments’ priorities for functional expenditure nor will it advise on arbitrary arithmetic cuts in public sector expenditure such as retrenchment of public sector staff.  These are not decisions that the Commission can make, but are rather political decisions for which there should be social consensus.  The Commission will recommend ways of making the public sector more efficient by doing either of two things: achieving more output and better quality services from the same level of resources or getting the same level of output and quality of service from fewer resources.

How does the Commission treat the issue of growth?
The rationalization of expenditure can lead to increased productivity and growth.  However, the full treatment of the issue of growth will not be dealt by the Expenditure Commission, but rather by an entity called the ECCU Task Force on Debt Growth and Development.  The Task Force, which was established in October 2010, will examine the prospects for economic growth in the ECCU and recommend a path for stimulating and sustaining growth in a high debt situation and for transforming the economies.  The recommendations of the Expenditure Commission and the Task Force will be very essential for future policy making in the ECCU.

Is there collaboration with the Expenditure Commission and external agencies?
The Commission works in close collaboration with the ECCB.  The Commission also continues to consult with staff of the IMF Fiscal Affairs Department to examine the results of expenditure studies that were conducted by the IMF on the six independent countries of the ECCU.

What is the role of the private sector in the work of the Commission?
The input of the private sector, in particular their views on public sector expenditure reform, is crucial to the Commission.  The private sector is a provider of goods and services to the government, and there may be ways of increasing efficiencies in the public-private sector partnership which the Commission can identify. 

What is the role of the public in expenditure reform?
The public needs to be more introspective.  The responsibility for government efficiency rests with the entire public.  There should be an individual sense of responsibility for increasing productivity and controlling expenditure.  A better sense of responsibility, ownership and accountability is needed by everyone, especially with regard to wasteful use or abuse of government property and/or services.
 
top ^

Links To Related Research Work

 
World Bank Websites on Public Expenditure Reviews and Reports

Public Finance>Public Expenditure Review

 
Economic Policy>Public Expenditure Review
 
Public Expenditure Reviews (PERs)

Website for US Fiscal Commission and related article

The National Commission on Fiscal Responsibility and Reform


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