(Excerpts of Dr. Friday’s Press Statement. Pt. 2)
It is clear that, when one looks at the performance of this government that the overdraft provision; an important aspect of our country’s finances has been abused and unlawfully used as an additional source of finance way beyond what is permitted the law.
To give you a better sense of the government’s abuse of the overdraft, I have set out here the situation for the period 2009-2018. The end of year overdraft balances (consequently the opening balances for the following year) for the years 2009-2018:
The year-end overdraft for 2019 is $31.6 million borrowed at an 8% interest at the Bank of St. Vincent and the Grenadines (BoSVG). In other words, the guardrails have been breached by the government. The guardrails are to help to prevent those who are in the government from running amok with respect to the country’s finances and to do so in the dark, without accountability and transparency. They have run-off the road of responsible financial management and they have steered the country towards a financial cliff. In other words, the finances of the government are in deep trouble. But those responsible continue to ignore the problem and to ridicule those who expose it.
Let us look a little closer at the Estimates for 2018. By September 2017, the overdraft was at $72.3 million way beyond the authorized limit of $50 million. That is a lot of money. The overdraft limit has been raised by this government to $50million now. I think it is too high. But the ULP government obviously does not think it is high enough, because they keep exceeding the limit set by Parliament.
The Minister of Finance must have realized that he had to do something about the situation. Or, perhaps the bank pleaded with the government to do something to bring the overdraft facility into legal compliance. So, the Minister agreed with the bank that since they can’t pay off the overdraft, come 2018; $40 million of the overdraft would be converted into a loan.
No resolution under Section 44 was done as it turned out, the actual outturn for 2017 was a total overdraft of $57.4 million plus the $40 million converted loan. So, it would have been over $97million had they not converted part into an ongoing loan. This was done essentially in the dark and was only explained in a footnote to the 2018 estimates. Imagine that! A mere footnote to tell us that they were unlawfully borrowing money without parliament’s approval. Indeed, without even as much as coming to parliament and explaining it after they had done it.
The record (i.e. Estimates) shows other similar loans on the books at 30/9/2017. Account General Overdraft loan – BOSVG, $23,183 170 (8.5% int.) and Account General Loan – BOSVG, $15,000 000 (6.5% int)
The 2019 Estimates reports: Accountant General Overdraft Loan-BOSVG, $17,487,440 (8.5% int); Accountant General Overdraft Loan II – BOSVG, $39,205,968 (7% int) and Accountant General Loan – BOSVG, $13.7m (6.5% int)
Also, the 2020 Estimates reports: Accountant General Overdraft Loan-BOSVG, $36,739,059 (8.5% int); Accountant General Overdraft Loan II – BoSVG, $9,675,487 (7% int) and Accountant General Loan- BoSVG, $12,211,130 (6.5% int)
There was no authorization from Parliament to borrow more than $50m, yet the Government did. There was no authorization from Parliament to take an on-going loan at BOSVG; yet the government did. The government has been unlawful by: (1). Exceeding the ($50million) overdraft limit set by resolution of Parliament. (2). By not paying down the overdraft by year end as the law requires. And (3) By converting the overdraft to ongoing loans, called Accountant General Loan, without prior authorization from Parliament to take those loans, and hence making them part of the stock of public debt.
The management of the BOSVG must be concerned when they see the government’s overdraft climbing beyond the legal limit and realize, as year-end approaches, that the money would not be repaid as required.
As for the country’s finances, as I said in the Budget Debate, it is like the government is playing a bad hand of Pedro (the card game) because it begins every financial year in the hole, as the outstanding overdraft is still to be paid. This reckless, lawless borrow and spend practice by the government is costing the country dearly. Because the overdraft and the overdraft loans carry high rates of interest between 6.5% and 12%; no wonder the debt service payments are going up and now account for nearly 40% of current revenue.
Is St. Vincent and the Grenadines a modern democratic country, or is it the plaything of those in government, especially the present and past Ministers of Finance, to do with as they please without accountability?
The government must be accountable to the people through Parliament. It must respect the laws governing the finances of the country. And, most of all, it must respect the people of St. Vincent and the Grenadines and show this by managing the finances of the country in the best interest of the people. That is what a responsible democratic government does. But sadly, this ULP Government has failed miserably to meet even that basic standard. The people demand better and must work for better and together bring about the change our country so badly needs.