Question Tag: Fiscal Planning

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  • 2 Marks

PSAF – Nov 2019 – L2 – Q5d – Public sector fiscal planning and budgeting

Explanation of the difference between planning and budgeting in the public sector.

Explain the difference between planning and budgeting in the public sector. (2 marks)

Government needs to plan its activities, programmes, and projects by setting clear objectives and targets for a given period. Fiscal planning refers to government’s anticipation of revenues, spending, and financing within the planning period. Fiscal planning involves the determination of government revenue, spending, and borrowing for the ensuing year. Fiscal planning is very important in government budgeting as it provides the macroeconomic and fiscal framework within which the budget is implemented.

Therefore, planning relates to fiscal planning which entails the policy-making stage of the budgeting process. It is the fiscal policies that influence the budget statement. Budget, on the other hand, is the expressing of government policies and programmes in some quantitative terms. It relates government spending to the attainment of fiscal and economic policies of government.

(2 marks)

  • 5 Marks

PSAF – Mar 2023 – L2 – Q5c – Public sector fiscal planning and budgeting

Outlines key issues that should be specified in a Fiscal Strategy Document as required by the Public Financial Management Act.

The Minister of Finance shall, not later than the end of May of each financial year, prepare and submit to Cabinet for approval, a Fiscal Strategy Document.

Required:
Outline FIVE (5) issues that should be specified in the Fiscal Strategy Document.
(5 marks)

The Fiscal Strategy Document, as required by the Public Financial Management Act, should specify the following key issues:

  1. Medium-Term Fiscal Framework:
    The document should outline the government’s medium-term fiscal framework, including measurable fiscal objectives and targets that will guide short and medium-term fiscal planning for the next three to five years. This framework should be consistent with the government’s fiscal principles and policy objectives.
  2. Macroeconomic and Fiscal Forecast:
    The document should provide an updated and comprehensive medium-term macroeconomic and fiscal forecast. This includes current developments and projections for key economic indicators such as GDP growth, inflation, and fiscal balances over the forecast period.
  3. Medium-Term Expenditure Framework (MTEF):
    The Fiscal Strategy Document should include the government’s Medium-Term Expenditure Framework, which details the resource envelope and overall expenditure ceiling for the public sector. This framework ensures that spending plans are aligned with available resources and fiscal sustainability.
  4. Fiscal Policy Measures:
    The document should specify the fiscal policy measures that the government intends to implement to achieve its fiscal objectives. These measures may include tax policies, expenditure controls, and other actions aimed at maintaining fiscal discipline and achieving macroeconomic stability.
  5. Fiscal Risk Statement:
    The Fiscal Strategy Document should include a comprehensive fiscal risk statement that identifies and quantifies the potential risks to the fiscal outlook. This statement should cover risks related to macroeconomic assumptions, contingent liabilities, guarantees, and public-private partnerships. It should also include strategies for mitigating these risks.
  6. Debt Management Strategy:
    The document should provide details on the Medium-Term Debt Management Strategy, including debt sustainability analysis and the impact of alternative macro-fiscal scenarios on debt levels. This strategy ensures that public debt is managed prudently and remains within sustainable levels.
  7. Progress Report on Previous Fiscal Strategy:
    The document should include a progress report on the implementation of the previous fiscal strategy, highlighting achievements, challenges, and areas for improvement.
  8. Alignment of Statutory and Earmarked Funds:
    The document should address the alignment of statutory and other earmarked funds with national macro-fiscal goals and targets, ensuring that these funds contribute effectively to overall fiscal policy objectives.

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