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Commentary: Suspicious Balanced Budget

icon2019/08/20
iconBrowse:145

 A Commentary

 

Suspicious Balanced Budget

 

Source: China Times

August 20, 2019

 

Premier Su Tseng-chang (蘇貞昌) recently reported to President Tsai Ing-wen (蔡英文) on the progress of the draft 2020 Central Government General Budget Bill. The amount of estimated annual expenditures and revenues would be NT$2.1 trillion (approximately, US$67.2 billion) each. Tsai recognized the Cabinet’s efforts, as it would be the first time that the Central Government General Budget Bill reached a balance since 1998. However, it would be reasonable to question whether the government intentionally balanced the budget or not since the presidential election would be held in less than five months.

 

Even if intentionally planning a balanced budget bill was not a campaign strategy, President Tsai still failed to distinguish between a draft budget bill and an already-audited budget. An audited budget refers to the final accounting of a budget based on the government’s actual annual revenues and expenditures, while a draft budget bill only consists of an estimate of annual revenues and expenditures. The budget for 1998 maintained a balance after final accounting; however, the budget for 2020 would be a balance between estimated annual revenues and expenditures. The two are different in essence.

 

Since the Budget Act was amended in 1998, revenues from sales of bonds and payments to bond holders had been excluded from the calculation of annual revenues and expenditures in a budget bill. However, an amount of NT$85 billion (approximately US$2.7 billion) was compiled in the draft 2020 Central Government General Budget Bill to repay government debts. As a result, the government would have to raise money through public financing in order to make up the difference between revenues and expenditures for 2020. In other words, using money raised from government borrowing to pay off old debts will not decrease the amount of the existing government debts. Finally, governments at all levels may overestimate annual revenues, and this can also lead to a false appearance of a balanced budget bill.

 

In short, although it appears that annual revenues and expenditures maintain a balance in the Cabinet’s draft 2020 Central Government General Budget Bill, there is an imbalance between estimated annual revenues and actual annual expenditures. In addition to that, after the Legislative Yuan begins to review the draft budget later this year, a discrepancy between estimated annual revenues and expenditures can emerge, and the government may have to raise more money through public financing. Therefore, we should not count the chickens before they are hatched.

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