Ten Public Expenditure Review Committees to strengthen fiscal consolidation

The Government has appointed 10 Public Expenditure Review Committees (PERC) comprising five or six members each with the aim of rationalising state expenses through a systematic review to strengthen the country’s fiscal consolidation and economic recovery process, the Finance Ministry announced.

The Cabinet of Ministers at its meeting held on February 6, 2023 decided to appoint these committees with the participation of public and private sector experts to rationalise the government expenses of 10 key Ministries using the Zero-Based Budgeting Approach (ZBB).

The aim is to strengthen the fiscal consolidation process and support the economic recovery process, a senior official of the Ministry told the Business Times. There are several drawbacks in the long-standing budgeting practices adopted in Sri Lanka. Over the years, this has resulted in finances being allocated for redundant activities, duplications and unproductive functions.

As a result, there are often insufficient funds for core activities and functions of key line ministries. The prevailing fiscal crisis has made it all the more important to allocate scarce resources in the most efficient and productive way possible, the ministry statement highlighted.

In most cases, the annual budget is prepared on the basis of incremental adjustments to the previous year’s budget, without a rigorous review of the rationale and efficacy of past resource allocations.

With this major public finance reform to introduce Zero Based Budgeting, it will become necessary for line ministries to provide justifications for resource allocations regardless of previous years’ budgeted allocations the Ministry revealed.