[Honiara, 2 nd December 2024] – Effective and sound budgeting is a critical financial planning tool that helps individuals, businesses, and governments manage (account for) their finances by projecting, using scientifically validated and researched tools, future incomes and expenses; not just for 2025, but in most cases many years ahead, and especially in economic environments of significant instability or inconsistencies.
Therefore, the government budget is more than a financial document; it is a strategic framework that defines the priorities of a nation, addressing current challenges while laying the groundwork for future growth. As fiscal policies shape the economic and social fabric of a country, it is essential for the government budget to embody inclusivity, sustainability, integrity and accountability.
Sound budgeting and financial management practice is defined to embody the generally accepted principles guiding budget preparation, execution, monitoring and evaluation which are the main stages of a sound budgeting process.
Budgets represent a plan on how resources can be allocated effectively to ensure progression of a set of key objectives that are determined through a sound strategic planning process.
In the case of the national budget, this represents how the Government intends to direct resources towards progressing its plans to develop and sustain the Solomon Islands economy.
It is therefore the responsibility of every citizen and taxpayer to understand what the Government budget means for them and to be informed on how it affects their lives through effective service delivery which is the core objective of any government.
The intention of this article is to inform readers on what a sound Government budget should look like and what happens when budgets are not credible and do not deliver public services as expected.
Use of Reliable and Accurate Data - Budget Credibility
For a budget to be financially sound, it has to be credible. Credible budgets are built on reliable revenue and execution forecasts as well as their accurate and consistent implementation. They are a key prerequisite to ensure the transparent and effective use of resources in line with their planned service delivery and investment targets.
For Solomon Islands, the government’s priority areas of focus include economic transformation, good governance, national unity, and human capital development.
The national budget accompanied by the fiscal policies of the government details the government’s plans on how it intends to progress its key priority objectives through effective service delivery to its citizens.
Therefore, to be able to effectively deliver services to its citizens, it is critical that the strategic framework that defines the priorities of the nation and aimed at addressing current challenges (which is the government budget) be credible and based on accurate and reliable information (whether this information is based on actual events or projected / estimated).
The lack of a credible budget process may lead to poor implementation of government policies and eventually impact on the quality of the services the government provides to its citizens. It is therefore critical to ensure that the government budget is fiscally and financially sound by ensuring that the process through which it is developed has integrity by being transparent, inclusive and based on accurate and reliable data as this directly impacts on the credibility of the budget as an effective financial planning tool. Having a financially sound budget will enhance public confidence in the likelihood of achieving the targeted goals for economic development and transformation.
Budget credibility is therefore critical to ensure the transparent and effective use of resources in line with their planned service delivery and investment targets.
Budget Reporting, Monitoring and Evaluation
Effective reporting, monitoring and evaluation is equally critical to determine whether the budget is used properly to progress government’s plans in the right direction or not. There must be an effective monitoring and evaluation mechanism to allow effective reporting of reliable and accurate data/information against projected. Otherwise, there is no way for the public to know whether budgets are effective or not thereby leading to lack of accountability and transparency.
It is the responsibility of the government to ensure that there are sufficient processes and adequate checks and balances in place to enable them to discharge their stewardship responsibility effectively to the people. Transparency and accountability are critical in enhancing public confidence in the ability and competence of the government.
How can a credible budget be achieved?
The above illuminates where the skills and competencies of a professional accountant can come to the forefront, and in particular why it is essential for government accountants to be part of a professional accounting body such as the Institute of Solomon Island Accounts (ISIA).
Accountants are educated and trained in finding out the required information and parties to provide such information. They have the skills to provide the technical support to ensure the integrity of the budget process and determine accurate financial information required to assist in developing the budget.
Key positions in various government ministries such as Financial Controllers must be occupied by professionally qualified people who are technically competent to support this important process to ensure that the end budget document is a financially sound document and well aligned to government priority areas.
Support from accounting professionals is also required for effective reporting, monitoring and evaluation.
Lack of the involvement of professional accountants can drastically affect the credibility of financial reports prepared to support the whole budgetary process. This can lead to the lack of accountability and transparency in how public finances are being managed to achieve the goals and objectives of the budget in terms of service delivery to Solomon Islanders.
What a Credibly-Sound Government Budget Should Look Like
How can one assess the soundness and credibility of the government budget? There are some indicators that can be used to determine this which are outline below:
1. Prioritise Economic Growth and Development
The budget must act as a catalyst for economic progress by investing in:
- Infrastructure Development: Robust funding for roads, digital infrastructure, and energy projects to stimulate economic activity and attract private investments. o
- Small and Medium Enterprises (SMEs): Support for local businesses through tax incentives, grants, and easier access to credit. SMEs are the backbone of the economy and pivotal in job creation.
- Innovation and Technology: Allocations for research and development in emerging sectors like artificial intelligence, renewable energy, and biotechnology to remain globally competitive.
2. Address Social Equity and Inclusion
A budget must ensure that no one is left behind by focusing on:
- Education and Skill Development: Substantial investments in schools, vocational training, and digital literacy programs to empower the workforce of tomorrow.
- Healthcare for All: Expanding access to affordable, quality healthcare with provisions for public hospitals, vaccination programs, and preventive care.
- Social Welfare Programs: Targeted subsidies and safety nets for vulnerable groups, including the elderly, women, children, and the differently abled.
3. Ensure Fiscal Responsibility and Sustainability
While growth and welfare are critical, maintaining fiscal discipline is equally vital to avoid excessive debt and inflation:
- Balanced Expenditure: Ensure a prudent balance between capital investments (long-term assets) and revenue expenditure (operational needs).
- Effective Taxation Policy: Widen the tax base while ensuring progressive taxation where higher- income groups contribute proportionately more. Avoid overburdening the lower-income populace.
- Debt Management: Borrow responsibly, aligning debt servicing with projected revenue growth.
4. Emphasise Environmental Sustainability
The budget must integrate climate action and environmental conservation to secure the planet for future generations:
- Green Energy Projects: Incentives for renewable energy sources such as solar, wind, and hydroelectric power.
- Climate Resilience: Funding for disaster management, flood defences, and afforestation initiatives.
- Sustainable Urban Development: Investments in public transport, waste management, and eco- friendly infrastructure.
5. Foster Transparency and Accountability
Public trust hinges on how transparently the budget is prepared and executed:
- Open Budgeting Process: Engage citizens, experts, and stakeholders in the formulation phase.
- Detailed Reporting: Present a clear breakdown of revenue sources, spending areas and future commitments.
- Independent Auditing: Regular audits to ensure funds are used as intended, with corrective measures for any lapses.
6. Support for Resilience and Innovation
In an era of global uncertainties, the budget must include provisions for
- Crisis Management: Emergency funds for health pandemics, natural disasters, or economic downturns.
- Job Creation: Programs for employment generation, especially in rural areas, through public works and industry partnerships.
- Digital Transformation: Funding for digital infrastructure and cybersecurity to adapt to the digital economy.
A Call for Collaborative Action
A well-rounded budget cannot be crafted in isolation. It requires inputs from economists, accountants, technocrats, civil society, and citizens. Policymakers must prioritise transparency, inclusivity, and evidence- based planning to address the nation’s immediate needs while preparing for the future.
As we move forward, the government has an opportunity to set an example by creating a budget that reflects not just fiscal prudence but also the aspirations and potential of its people. More consultations need to be done with stakeholders to ensure that the next budget that is brought to Parliament truly reflects one that is representative of the immediate needs of the people of Solomon Islands.
Let the budget be a promise of progress, prosperity, and sustainability for all Solomon Islanders.
[End of Statement]