BASSETERRE, St. Kitts, April 1st 2011 (CUOPM) – St. Kitts and Nevis Prime Minister Hon. Dr. Denzil L. Douglas has blasted opposition parliamentarians and others in the community for misleading the nation that several financial resolutions circulated at the February 9th meeting of the National Assembly and passed at the March 17th sitting, were to borrow over half a billion dollars.
“It is either out of ignorance that people make these statements or seeking to have some political mileage, because ignorance can always be clarified with what the facts are, especially when the facts have to do with existing legislation,” said Prime Minister Douglas, who pointed out that the Finance Administration Act 2007, provides for the control and management of public funds, the authorizing of expenditure, the raising of money by Government and the control of the public debt and giving of guarantees by the government for itself or other entities in terms of borrowing.
“Never before was this kind of legislation brought to this Parliament, except in 2007, when my Government in an attempt to ensure that there was transparency and accountability with regard to its actions, brought this piece of legislation to Parliament referred to as the Finance Administration Act 2007 and ensured that borrowing guarantees were provided for by law,” said Prime Minister Douglas.
He said that the Act is a modern piece of legislation which provides in a comprehensive manner the legal basis that is necessary for operating in a modern, global, information age where accountability and transparency are two of the cornerstones of good financial management.
“Part VIII of the Act provides for Public Debt and guarantees. In section 48 it states that ‘Money shall not be raised on the credit of the Government except under the authority of an Act of Parliament or of a Resolution of the National Assembly’.
That is why several resolutions were brought to this Parliament the last time that we sat,” said Dr. Douglas, who also referred to subsequent sections that outline how short-term borrowing and long term borrowing should be dealt with.
“Section 49 (1) deals with Short Term Borrowing and states ‘The Minister may in a financial year, when authorized by resolution of the National Assembly for the purpose of meeting current requirements, borrow money from a bank, any other financial institution or any other entity by means of advances to an amount not exceeding in aggregate the sum specified in the resolution and 49 (2) states that ‘A Resolution referred to in subsection (1) shall have effect for a period not exceeding twelve months’,” Dr. Douglas said.
He said it means that on an annual basis, the Minister of Finance must come to the National Assembly and request approval for the renewal of the Government’s short term borrowing since these funds continue to be necessary to meet the financing requirements of Government to administer the affairs of our nation.
“So what we did at the previous sitting of the Parliament is what we did last year, because the Act speaks to borrowing, guaranteeing, etc. indicating clearly that it has to be done every year. It does not mean that we are borrowing a half billion dollars as some who are ignorant of the law or the practices, the procedures of Parliament, the procedures of administration, especially financing administration, ignorant of these things going out into the public making false statements,” said Prime Minister Douglas.
Dr. Douglas said all the government was doing in Parliament was adhering to the law, making sure that the Finance Administration Act of 2007 is adhered to as the government at the start of the year prepares itself to handle matters pertaining to short-term borrowing as has been done in previous years.
It means that on an annual basis, the Minister of Finance must “come to the National Assembly and request approval of the Assembly for the renewal of the Government’s short-term borrowing, so that these funds continue to be necessary to meet the financing requirements of our government to administer the affairs of our nation.”
Prime Minister Douglas reiterated that the Act explicitly states the instruments for which this renewal would be necessary.
“At no stretch of the imagination, Mr. Speaker, were we saying at the last time that we were meeting that the Government was going to National Bank, to borrow EC$350 million to pay for our Treasury Bills because we cannot pay. Those are foolish statements, ignorant and foolish statements because those who make them are malicious in making those statements,” said Dr. Douglas.
“These are fluctuating overdrafts, treasury bills, or other similar means. Therefore, since the Government has Treasury Bills and Overdraft facilities that it would like to continue or roll over to use for the operation of the Government annually, the short term Resolution to give the authority to use these instruments must be approved annually by the National Assembly. Even though the Short term Resolution can be used to increase the limits on short term borrowing, given the Government’s commitment to put debt on a downward trajectory we have not increased the limit for Short term financing over the last three years,” explained Prime Minister Douglas in the National Assembly.
“Hence the Treasury Bill and Overdraft limits that we have sought this year are the same as last year, Mr. Speaker. Since these same requirements apply to guarantees for the debt of Nevis Island Administration and Public Corporations, these guarantees are also included in the Resolution on an annual basis,” said Dr. Douglas.
He said that the limits for short-term borrowing have remained basically the same over the past four years and in fact the limit for overdraft has been reduced over the years moving from EC$160,000,000 in 2009 to its current standing of EC$1,000,000
.
“It should be noted that even though the Act requires that all Long Term borrowing must be raised under the authority of an Act of Parliament or a resolution of the National Assembly with respect to long term debt there is no need for such an annual renewal of approval. It should be noted also that provided that there is an Act of Parliament or a resolution already in place under which such funds may be raised it would also not be necessary to come to Parliament with a new instrument for long term borrowing. One such piece of legislation is the Development Loans act 1986 as revised 1988, 1993, 2002 which provides for the raising of loans up to 60% of GDP.
(GDP at Market prices rebased is currently $1.79 million),” said Prime Minister Douglas.
“This is the fourth time that the Short-Term Borrowing Resolutions have been passed in the National Assembly and each time the same explanation is given. It is simply an annual authorization to roll over or renew the short term borrowing limits since we are not asking for approval to borrow more in the short term,” said Dr. Douglas, adding:
“Whenever there is need for new borrowing or granting of new guarantees these are done separately as the instrument and the entity for which they are intended must be spelt out in the resolution.”
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