‘Urgent’ need for external audit of the Govt finances

Saturday 29 August 2020 | Written by Emmanuel Samoglou | Published in Economy

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Accurate and up-to-date data needed for effective budgeting, says international report.

The International Monetary Fund says an external audit of the past five years’ government accounts must be completed, as an “urgent” priority.

Last month, Finance Minister Mark Brown said the audit of the 2017, 2018 and 2019 accounts would be delayed till later this year – but he said most of those audits completed had come back satisfactory.

A Monetary Fund report outlines recurring roadblocks to growing the nation’s economy.

The technical assistance report tasked a Monetary Fund team to look at fiscal policy, public debt sustainability, the financial sector, and policies for Cook Islands’ transition to high-income status.

The report doesn’t yet factor in the impact of the Covid-19 shutdowns on the government’s financial situation.

The report highlights impediments to economic growth, most urgently, the external auditing of the government’s financial accounts.

Accurate and up-to-date data has been cited as a vital component for effective budgeting, however the country’s most recent audit was for the 2014 fiscal year.

An infrastructure gap has continually been highlighted by government as an issue that has slowed expansion of the economy, which is also mentioned in the report.

The report recommends government increase capacity to better plan and manage infrastructure projects, along with better execution of the capital budget – which includes projects in the areas of roadworks, water, sanitation, and health.

And it recommends government continue to make improvements in public administration capacity. Following the raising of public sector salaries to attract skilled Cook Islanders living overseas, government can also expand on training initiatives.

Public debt levels are described as sound, however vulnerabilities exist and the debt-to-gross domestic product (GDP) ratio – which was at 15 per cent at the start of the year – could rise to unsustainable levels in the event of a natural disaster.

Since then, the government has announced $137 million in economic aid to mitigate the effects of the coronavirus pandemic on the local economy. Mark Brown has said this will be funded first through existing reserves and aid money, then through borrowing.

The report rounds out with a call for economic diversification, policies to attract high-income tourists, further investments in infrastructure, addressing the skills gap through immigration, and revamping the regulation of foreign direct investment, described by authors as “restrictive”.