Gov’t disregarding the financial laws – Dr Friday
OPPOSITION LEADER, Dr Godwin Friday has accused the Government of disregarding the financial laws that authorise borrowing, specifically through “illegal” use of the “overdraft” facility.
The New Democratic Party(NDP) President was speaking at a press conference held at the Democrat House on Tuesday, February 18.
Expanding on these claims, Dr. Friday referenced the words of a resolution usually moved by the Minister of Finance after the Estimates are debated, in order “to seek parliament’s approval to “borrow” money for the Government by way of fluctuating overdraft to meet the Government’s current financial needs”.
The words of the Resolution read, “Be it resolved that this Honourable House do authorise 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 (beginning of the year) to (end of the year) for the purpose of meeting the current requirements of the Government.”
This borrowing is authorised by section 44 and 45 of the Finance Administration Act(FAA).
The Leader of the Opposition also stated that “the Overdraft facility is to enable smooth implementation of the Budget broadly speaking,” and is expected to cover what has already been discussed in Parliament.
Friday had three claims that he wished to make against the Government.
Firstly, that this overdraft limit of 50 million, set out in the Resolution and Finance Administration Act, had been exceeded repeatedly. Further, that the Government has committed an infraction “by not paying down the overdraft by year end as the law requires!”
He posited, “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 in the law!”
He provided statistics which he said were the overdraft balances at the end of the years between 2009 and 2018. In 2009 he said it was 85.4million; in 2010, 77.8m; in 2011, 29.1m; in 2012, 45.1m; in 2013, 52.5m; in 2014, 52.7m; in 2015, 61.9m; in 2016, 57.5; and in 2017 it was 57.4. By September of 2018 the overdraft balance, said Friday, was 47.7m.
“The year-end overdraft for 2019 is $31.6 million borrowed at an 8% interest at BOSVG,” he noted.
“In other words, the guard-rails have been breached by the government; 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,” the Opposition Leader charged.
The last concern of the NDP comes after closer examination of the 2018 Estimates.
“By September 2017 the overdraft was at $72.3 million way beyond the authorised limit of $50 million,” the Opposition leader said.
Friday commented that based on the situation, either the Government or the Bank must have indicated that something ought to be done.
He ventured, “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.
“As it turned out, the actual out turn 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,” Friday stated. He also said that this was done in the dark, and only explained in a footnote to the Estimates for 2018.
He cited other instances on record of similar loans.
Therefore, his last accusation to the Government, was that they were acting unlawfully “by converting the overdraft to ongoing loans, called Accountant General Loan, without prior authorisation from Parliament to take those loans, and hence making them part of the stock of public debt!”
Making reference to statements he made during the 2020 budget debate, Dr. Friday said it’s 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% ,” the Opposition Leader warned.
Finally, Friday called on the Government to be accountable to the people through the Parliament, and to respect the laws governing the finances of the country.
When asked by a reporter about the sanctions related to the alleged actions, Dr. Friday indicated “the ultimate sanction comes when they call elections that is going to be here this year.”
Continuing, he noted that as a responsible Opposition they make the public aware of “these matters”, and in exposing them, ensure “that the pressure is brought to bear on the Government to understand that these laws they are there not as a matter of convenience but as a requirement for them to maintain.”
He mentioned that in Grenada there is a Fiscal Responsibility Act, and he said that this is something he thinks should be “seriously” considered here.
Furthermore, he reiterated, “If you don’t manage the financial affairs of the country properly there are costs associated with it, spending and spending and then overall having the debt go up and you have to then pay for these loans at a rate of eight and a half percent interest. That’s very expensive.”