Preparation Of Budget 2021 -22

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The preparation of Budget for 2021-22 in a crisis of Covid -19 will be a challenging one. This pandemic has erupted when most countries had just begun to implement their 2020 budget. The short term priority, since then, has been designing and implementing immediate responses to the crisis through supplementary budgets, contingency reserve funds and emergency decrees. 

The preparation of Budget for 2021-22 will be a challenging task given the unprecedented uncertainty about the post lock-down economic outlook and the massive fiscal shock from the pandemic, compounded in resource - risk countries with decline in commodity prices. Therefore, preparation of Budget for 2020-21 will need to : 

1) Evaluate the fiscal space for continued priority crisis spending and recovery             measures.

2) Take stock of the impact of the COVID crisis on the economy and the Govt.'s          fiscal position.

3)  Assess the Govt.'s financing needs.

4) Increase transparency along with accountability by providing a proper                    presentation and accounting of COVID 19 related fiscal responses, including          off-budget measures.

The strategy-setting stage which is an essential part of budget preparation process in normal times will play an even greater role in budgeting for 2021-22. While factoring in macroeconomic uncertainty, outline several scenario and strategies to mitigate these risks. A closer look will be needed to choose an appropriate strategy for promoting flexibility, which will be influenced by the existing budgetary and institutional settings. Like setting up for contingency/reserve needs, enhancing in-year budget flexibility mechanisms, adopting supplementary budgets.   

 Budget preparation process will require increased attention to institutional aspects and operational constraints linked to COVID 19 context which requires -

- Revisit time frames and deadlines. 

- Coordinate with institutional actors.

- Develop working methods, compatible with social distancing. 

- Invest in building political and public consensus and awareness.

While more flexible fiscal plans are necessary, non-credible fiscal plans can undermine economic confidence and raise financing costs. Recommendations to help address this issue are:

1. Clarify overall fiscal constraints considering financial needs.

2. Preserve a medium - term perspective to budgeting.

3. Re-anchor fiscal strategy.

4. Use the medium - term perspective to try to lock in future savings and reverse        impact of one - off measures. 

5. Give a clear picture of fiscal risks.

6. Clearly identify priority sectors. 

7. Prepare for a more demanding exercise than usual to set the baseline for the            new budget for 2021-22.

 8. Assess the feasibility and efficiency of the proposed new spending measures.

9. Be prepared to carry out bigger reallocation than usual. 

Uncertainty is inherent in Budget preparation for 2021-22, because of increased volatility in revenues and uncertain expenditure needs.  

Government should consider budget execution monitoring measures at the budget preparation stage, to support transparency and mitigate vulnerabilities to corruption of their COVID 19 measures. 

Each of the issues given above needs to be fully discussed, sorted out at the appropriate levels of administration to make a full clarity on the Budget . Conveying the right message on Budget documentation and approval gain even more importance with COVID 19 challenges. 

Amid high uncertainty and stress, the budget for 2021-22 will be a key policy document to assure stakeholders across the country - households and businesses -that the government has a credible strategy to mitigate the pandemic and support economic recovery. Documentation can support this by -

-  Explaining assumptions and uncertainty in the fiscal and economic outlook. 

-  Producing forward - looking guidance on financing.

-  Presenting the benefits and impacts for different groups in the economy. 


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