Building a Better Jamaica

BY ALICIA DUNKLEY Observer staff reporter dunkleya@jamaicaobserver.com
Wednesday, February 03, 2010

GOVERNMENT senators last Friday used their majority to push through a Bill making deferred financing agreements for Government projects a thing of the past, under heavy suspicion from Opposition senators who classified the move "a ruse".

According to the Government, the Bill, which brought a further amendment to the Financial Administration and Audit Act, was in fulfilment of another of the debt reduction conditionalities the International Monetary Fund set down for the administration, which is seeking a US$1.3-billion loan from the lending agency.

Deferred financing schemes allowed governments in the past to broker arrangements with approved contractors to fund and carry out infrastructural projects such as roads and bridges with payments being made at a future date.

But according to Leader of Government Business in the Senate, Attorney General and Justice Minister Dorothy Lightbourne, who piloted the provision, high interest rates and frightening cost overruns were just some of the ills of that practice. She further pointed out that the previous Government had in fact taken a decision in 2005 to move away from this kind of financing based on this realisation.

But Opposition senators Mark Golding and Leader of Opposition Business in the Senate AJ Nicholson were far from satisfied with that explanation.

"We do not feel that the Bill as drafted presently achieves what the Government is aiming for," said Golding. "What is missing is a provision that says the Government shall not enter into any future deferred financing agreements. That is not in the Bill and that is a major gap; one would expect a provision in the Bill that would specifically say that."

The senator said given the fact that the administration was trying to tighten the hold on its purse strings the finance minister, who is empowered under the Act to single-handedly approve credit arrangements, must be forced under the Act to give approval to report to Parliament the number and cost of credit agreements.

But Nicholson refused to mince his words.

"We believe this Bill is a ruse to use what is called here Credit Arrangements in circumstances where Deferred Financing can be used. If it is not so, tell us. Because the (present) minister of finance (Audley Shaw) railed for several years against the use of deferred financing when he was in Opposition. I would like to know the difference now," Nicholson demanded.

"Things we used to do we can do them no more; if deferred financing was bad then and brought us to where we are, deferred financing cannot be good to take us into progress," Nicholson said.

"If it was used for election purposes then (2002), as suggested by (Shaw), then it cannot be used for election purposes now. If the same route that brought us to where we are now is going to be taken, it cannot correct the situation," Nicholson argued further.

He also took issue with what he said was the absence of any provision obliging the minister to report to Parliament soon after the project is approved, as was provided for when deferred credit arrangements were allowed.

"What is the protection and oversight Parliament will give to this agreement? In this instance, all that is necessary for the arrangement to be approved is the minister's approval," he said.

"We say it can't work, not good enough; that is the ruse we speak of. It's a ruse, nothing more or less, because if any minister gives approval, the Parliament doesn't know anything about it.

"If we don't get answers and reasons for the public to chew on as far as this, we can't support it," Nicholson said.

The Government, however, would not budge.

"When we do this amendment, it means deferred financing is now not allowed under the law... there is much ado about fiscal responsibility, and legislation is coming, and that will mandate that the minister set out the macroeconomic and fiscal policy framework," said Lightbourne.

"There will be provisions for supervision and monitoring of public finances; periodic reports will have to be made to Parliament," she added.

As to Nicholson's insistence that there was no difference between what existed and what is being proposed, she said: "With deferred financing you don't know what you owe because it is not in the budget. This administration suffered from that when... debts that were on the books that no one knew of started to pop up," she said somewhat indignantly.

In the end, the Opposition, in deference to its views, voted nay twice, leaving the Government senators to push through the provision on their own steam.

Ironically, the same Bill was passed in the House of Representatives last Tuesday without demur.