(Excerpts of Dr. Friday’s Press Statement)
The ULP Government has demonstrated over the years that it has little or no regard for our laws governing financial accountability and financial management. The Minister of Finance has disregarded financial accountability. He has disregarded the law in the way he has abused the use of Special Warrants by not bringing them to Parliament in a timely manner (up to 5 years late), by exceeding the limit set by Parliament and by paying for things that could have been properly budgeted for and were not unforeseen as required by law.
I wish to address another example– an extremely serious matter– of the way the Minister and his government have disregarded the laws that authorize government borrowing. Specifically, I wish to address the government’s illegal use of the overdraft. The use of overdraft “borrowing” is allowed by law. Each year as part of the Budget exercise, at the end of the debate and approval of the Estimates, the Minister of Finance moves a Resolution to seek Parliament’s approval to “borrow” money for the Government by way of fluctuating overdraft to meet the Government’s current financial needs. I set out the legal authority for this below.
The moving of the Resolution normally does not require any debate, as it is simply the means of financing the Estimates that was already debated and passed by the House. In other words, it is expected that the Government would seek approval from Parliament to borrow money as already discussed and passed in the House as part of the Estimates and Budget debates.
The Opposition does not normally raise any additional objections to the Resolution, as the financing of the Budget would have been thoroughly debated already, and the overdraft facility is to enable smooth implementation of the Budget broadly speaking. The only thing that might cause some concern or even debate is when the amount to be borrowed is this way (i.e. by overdraft) is increased from the amount set in the previous year and the Opposition is concerned about it.
The Resolution is stated in the following terms: “Be it resolved that this Honourable House do authorize the Minister of Finance to borrow by means of fluctuating overdraft or otherwise from First Caribbean Bank, or the RBTT Bank Limited, or the Bank of Nova Scotia, or the Bank of St. Vincent and the Grenadines, money to an amount not exceeding in the aggregate fifty million dollars, during the period 1st January, 2019 to 31st December, 2019 for the purpose of meeting the current requirements of the Government.”
This borrowing, as with all borrowings of the Government, is provided for by law, and therefore must be done in accordance with the law giving that authority.
The law supporting borrowing by the Government, including the overdraft borrowings, is set out in Sections 44 and 45 of the Finance Administration Act. This is what that statute law says:
44. Authorisation of debt.
No money shall be raised on the credit of the Government except under the authority of this or another Act of Parliament or of a resolution of the House of Assembly. (45).
(1) The Minister may in a financial year, when authorised by resolution of the House of Assembly, borrow money to meet current requirements from a bank or other financial institution by means of advances to an amount not exceeding in the aggregate the sum specified in the resolution.
(2) A resolution referred to in Subsection (1) shall have effect for a period not exceeding twelve months.
(3) The power to borrow money by means of advances from a bank or other financial institution conferred on the Minister by resolution in accordance with this section or in pursuance of an Act may be exercised by means of a fluctuating overdraft.
Simply put, this provision in s.45 is to cover the gap between expenditure outflows and the revenue inflows of Government, since these do not usually move in sync with one another, in order to meet “current requirements.”
A critically important feature of this facility or borrowing is the limiting of the Government’s borrowing power to one year. This is stated clearly in subsection 45(2) of the FAA when it says that the resolution authorizing the borrowing “…shall have effect for a period not exceeding twelve months”. This is then reflected in the usual Resolution of the House by specifying in that Resolution (seen above) that the overdraft borrowings are only for the period 1st January to 31st December of the year in which the resolution is passed or covers (i.e. the year that the Estimates cover). We just passed one in the House for the year 2020.
In other words, such borrowing is intended to be cleared (repaid) by the end of the financial year. It is not intended to add to the overall stock of public debt, as additional borrowings of the Government. Those borrowing that finance government programs and become part of the stock of public debt are already provided for in the Estimates and Budget.
The annual budget is the framework through which the various aspects of the financial management and control are performed. The underlying principle is to manage the two flows of income (recurrent revenues) and spending (recurrent expenditures) within the approved budget for a given financial year, as provided for in the Appropriation Act and the Finance Administration Act.
Think of them, if you like, as guardrails that are intended to prevent any administration that is for the time being running the country’s affairs from borrowing recklessly and doing as it pleases without the knowledge of Parliament and the people the Parliament represent.
This is why the Minister must come to Parliament to seek approval for all borrowings the Government wishes to incur. This is where the public scrutiny and oversight takes place. And this is where the Government has failed.