Should the MEF specify what it will use the contingency reserve for?

This week, deliberations on the 2023 Budget Bill began with disagreements between the executive branch and Congress after the legislature made changes to the bill.

Chairman of the Council of Ministers, Betsy Chavezwarned that Congress had included 10 additional provisions that implied additional costs in the amount of SGD 1,164 million allocated to the contingency reserve.

For his part, Congressman and Chairman of the Budget Committee, José Luna Galvez, argued that these were social proposals aimed at meeting the urgent needs of the population.

In addition, the legislator assured that the Government was not transparent, without specifying what money from contingency reserve.

“The lack of detailing the allocation of contingency reserve resources in the appendices’ reasons statement affects two principles of the public budget law: transparency and quality specialty,” he said during his speech to Congress. But is this statement true?

In accordance with Legislative Decree No. 1440, contingency reserve It is intended to finance expenditures that, due to their nature or situation, cannot be foreseen.

ESAN Graduate School of Business professor Jorge Guillen notes that the contingency reserve should be used mainly in emergencies such as a pandemic.

“There is a fiscal stabilization fund that was used during the pandemic to purchase medicines, covid tests and bonds. By regulation, the idea is that it is growing, not that it is taken at any time, but in an emergency,” he commented.

For its part, Carla Gavigno, professor of public administration at the University of the Pacific, clarifies that as long as the MEF supports the amount allocated booking there is no lack of transparency.

“The contingency reserve is funded in case of natural disasters, resources are allocated for rain care, activities have been funded even during covid-19 (…). to see what cannot be foreseen, which contradicts the logic of having a reserve for contingencies in the budget,” he explained.

Gavigno clarifies that the amount allocated for contingency reserve it cannot be less than 1% to cover those situations that cannot be predicted with monetary accuracy.