The Infrastructure Development Fund Act
By Christopher Ram
November 7, 2004
It was perhaps just another irony of Guyana's political culture that the main opposition political party returned to the National Assembly after almost one year to be greeted by the Infrastructure Development Fund Bill, which the PNCR described as the creation of a slush fund. The Explanatory Memorandum to this most important piece of legislation simply and inadequately states that "the Bill seeks to establish an infrastructure development fund, to provide for its funding and due administration and for matters connected therewith."
The Explanatory Memorandum which serves to explain the Bill's purpose and contents also states that "it is hoped that the Government, with the establishment of the Fund can become a facilitator, even though a minor one, rather than a mere provider of funds for infrastructure project [sic]."
Business Page objects to this bill on several grounds. BP
1) questions the bona fide of the bill;
2) considers the bill unnecessary since it is not convinced that the absence of such legislation has inhibited infrastructural development;
3) anticipates that it will lead to more corruption and less accountability of taxpayers' money;
4) believes that the bill can be successfully challenged as unconstitutional; and
5) believes that the bill is not in accord with the Fiscal Management and Accountability Act which the Government passed into law less than one year ago.
The Government has, as a matter of course, attacked the PNCR's criticisms of the bill as another misrepresentation by that party "clearly intended to sow confusion." A statement issued by the Ministry of Finance on November 1 completely ignored the severe and several criticisms of the legislation by Ravi Dev MP, in his column in the Kaieteur News. This statement was pure politics.
The provision in the bill that the financial statements will be audited by the Office of the Auditor General is no guarantee that the directors will make these available in a timely manner. The Minister of Finance is notorious for not tabling reports in Parliament despite his statutory duty to do so, yet here we are assigning him more responsibilities and powers over the finances of the country. Who needs to be reminded that he has failed to table in the National Assembly even a single report of the Guyana Revenue Authority - a clear violation of the law which this society now appears to accept as the norm!
A historical context
It took some research to trace the source of the provision of the constitution under which the bill is framed, as this is not clearly spelt out. It came as a great surprise to my few politician friends that the permissibility of a separate fund was enshrined in section 109 - Establishment of the Consolidated Fund - of the 1966 (Independence) Constitution which provided as follows:
All revenues or other monies raised or received by Guyana (not being revenues or other monies that are payable, by or under an Act of Parliament, into some other fund established for any specific purpose or that may, by or under such Act, be retained by the authority that received them for the purpose of defraying the expenses of that authority) shall be paid into and form one Consolidated Fund.
No one I spoke with has been able to explain the rationale behind the parenthetical exception but it was suggested to me that it might have been to allow for any independence golden handshake. This was a form of conscience-salving by the colonial power to the territories which they had exploited for centuries.
This Government has found the use if not the reason for the provision's existence.
Despite the fundamental changes to our constitution, first in 1970 to sever our ties with the Queen by the assumption of Republican status and then in 1980 when we went 'socialist,' and more recently when reason visited the country for a while and we set up the Constitutional Reform Committee which sought to undo some of the excesses of the 1980 constitution, section 109 has remained intact and is now found in section 216 of the current constitution.
The general specific?
What is interesting is that this is the first time in thirty-eight years that the provision about "some fund established for some specific purpose" is being invoked, and credit is due to whichever lawyer would have pointed out the possibility. Someone was clearly being clever, but was it clever enough? And even if without the famous comma, the language actually permits diverting revenues payable into the Consolidated Fund to some lesser fund. Is this consistent with the spirit of the constitution and the principle that all public monies other than with a few exceptions should go into the Consolidated Fund which is subject to a considerably higher degree of scrutiny than some special fund?
And can a bill which seeks to provide funds for the construction of bridges, wharves, building works, improvements and replacement of other capital assets including vehicles, vessels, machinery, instruments and equipment "required in respect of or in connection with the economic development or general welfare of Guyana" be considered as having been "established for any specific purpose"? Can something be both general and specific at the same time?
And to add to this vast array of unspecific purposes, the Schedule to the act allows for the funds to be applied in the acquisition of land (anywhere in Guyana one presumes, and for no stated purpose), making grants or loans or other investments in any public authority, or even to pay for depreciation. Even a passing acquaintance with the most basic concept of depreciation is sufficient to know that there is no payment for depreciation charges and that is, in fact, a mere book entry! (The payment was made at the time of acquisition and in the future you will have to pay for maintenance or replacement.)
Whatever have been its limitations - and the PNC has a poor record when it comes to the Consolidated Fund - the fund is considered so important that it is accorded a special place in the constitution.
It is reported on annually by the Auditor General under some very strict rules, is subject to specific accounting and reporting in the national budget that forces accounting and accountability by the Minister of Finance, and very importantly is subject to parliamentary scrutiny by the Public Accounts Committee made up of representatives of all the parties in the National Assembly. The so-called Infrastructure Development Fund is relieved of any such impediments, and interestingly, the Government refused to seek the views of the PAC, the public or the accounting profession in tabling this legislation.
This is a dangerous precedent which the Government can repeat whenever rules get in the way, since all it has to do is use its parliamentary majority to pass legislation diverting revenues from the Consolidated Fund to a special fund. Is that good for accountability or democracy, and is it fair to taxpayers?
One of the reasons the Government has given for the establishment of the Infrastructure Development Fund is the need to accelerate the infrastructural development of the country. That is indeed a noble and desirable objective but is it the fig leaf that conceals some other less honourable motive? Is the Government suggesting that the absence of such a fund has hindered infrastructural development? If so where is the evidence? Anyone who follows the annual budget speeches by the Minister of Finance would be only too familiar with the annual boast of how successful the Government is in terms of achieving the Public Sector Investment Programme (PSIP). Let us quote from the 2004 Budget Speech by Minister Kowlessar:
"Mr Speaker, the Government was able to implement 95 per cent of the public sector investment programme (PSIP), which was budgeted at $16.8 billion. This extremely creditable performance was due to improved programme and project planning, aggressive project monitoring, and the cooperation and logistical support of all stakeholders." But to show that 2003 was not some anomaly or an idle boast, let us look at the achievement of the PSIP for the past ten years as taken from the budget speeches:
Year % achieved
1999 Not stated
In those years where were shortfalls, it was not because of spending or execution capacity, but rather because some loan funds had not materialised as planned. This makes the performance all the more impressive and does not in the least suggest the presence of any hindrances to spending. Indeed the Government has often and with good cause been accused of just the opposite: that it rushes to spend taxpayers' money without enough attention or concern for proper financial management, parliamentary approval, accountability, corrupt practices or adequate planning and supervision.
For this administration, the ability to spend is a measure of success and competence even if among the projects would be included the bridge at Mandela Avenue, the stone scam, the Charity Wharf, the East Coast Embankment Road and the numerous schools on which billions have been spent on shoddy work causing double spending in so many cases.
Just as a footnote it should be added that for the same reason it ought not to be said as I have heard it said that there is some dissatisfaction with the performance of Minister Xavier. After all if he is not performing - and the numbers do not support this - then having someone do the job for which he will continue to be paid is hardly the answer.
And how does the establishment of a separate fund help to accelerate development? It cannot be that more funds will be available, since it is merely money from the Consolidated Fund that is now being siphoned off. Is it then that the approval process will be circumvented and that the financial rules governing the receipt and expenditure of public funds will not apply? Accountability has taken a knocking from the misuse of the Lottery Funds and the President's Youth Award whereby the President and Mr Lumumba seem able to walk around the country handing out public funds.
This new scheme seems designed to legalise such misuse and either suggests that we have learnt nothing from the experience or that the Government has found it useful, expedient and politically beneficial.
The IDB and accountability
Under the heading 'Strict Fiscal Discipline,' the Minister in the 2004 budget speech reported as follows:
"The Government is currently negotiating with the IDB a loan of US$32.8 million for a project to support the rational and transparent management of its fiscal and financial affairs. Implementation of the project will start later in the year. The Government will apply strict cost control measures and these will be enhanced by a tight fiscal stance and strict fiscal discipline. Programme budgeting will be strengthened to make budgets increasingly reflective of the Government's priorities... The system will make available timely financial and programme information and, more important, increase the capacity to support effective decision-making in managing budgets and resources."
In Ram & McRae's review of the 2004 Budget and at a public symposium on the budget hosted by the PNCR, the justification for the expenditure of $6.5B on such a nebulously defined project was questioned, and there was a call to the political parties and civil society to challenge the IDB's apparent irresponsible lending policies which impose additional burdens on taxpayers. The public is unaware whether the PNCR acted on that call and it cannot escape responsibility for not taking the matter more seriously much earlier. It is truly troubling that the IDB to all appearances cannot be held responsible for its actions in Guyana, but this new legislation must surely force it to take a more cautious approach in its lending policies to a government that deals in such a cavalier manner with financial matters.
Fiscal Management and Accountability Act
Business Page considers the new legislation not only unconstitutional but also inconsistent with the very specific provisions and requirements of the Fiscal Management and Accountability Act (FMAA) passed less than one year ago. Section 39 of the FMAA allowed for the creation of an Extra-Budgetary Fund by an act which must set out -
(a) the officials who will undertake the financial management of the Extra-Budgetary Fund, including the responsibilities and accountabilities of the officials charged with managing the Extra-Budgetary Fund;
(b) the banking arrangements that pertain to the Extra-Budgetary Fund;
(c) the accounting rules and auditing requirements applicable to the Extra-Budgetary Fund;
(e) the financial reporting requirements applicable to the Extra-Budgetary Fund, including the reporting of financial performance both during and at the end of each fiscal year.
Of interest as well is section 40 of that act which provides that "subject to any other law resources allocated from any Extra-Budgetary Fund for the purpose of financing Government social or economic development projects shall be included in the relevant investment plan and programmes contained in the annual budget and such resources shall be processed through the Consolidated Fund." Are the funds really extra-budgetary and does the FMAA require that the expenditure which the government is hoping to account for separately be passed through the Consolidated Fund?
Apart from all these issues, it is on the wider grounds of democracy and accountability that this legislation is most dangerous. The rights and duties of elected officials are being usurped by nine persons appointed by the Minister of Finance who can give directions to them and to whom only they are accountable. Is this what constitutional reform was all about? As a concession for taking away their rights to question public expenditure through the Public Accounts Committee of the National Assembly on which the entire parliamentary opposition is represented, the PNCR now has one of nine!
There has been no public reporting of the position of GAP-WPA on this legislation which sets a most dangerous precedent, but it must be to the PNCR, the largest opposition party, that serious responsibility points. As a party with all its top positions held by lawyers, it is well placed to take what must surely be the only recourse at this stage - to challenge the legislation in the courts.
It is with shock and sadness that I learnt of the death of Mr Patrick Denny, a gentleman and competent journalist with whom it was always a pleasure to exchange views. To his family and his colleagues at the Stabroek News and Sunday Stabroek, Business Page extends sincere condolences.