Finance Ministry to resuscitate old public debt law

Guyana’s existing legal framework for its debt management is not consistent with many elements of international best practices and would need to be improved since they are wholly inadequate and do not reflect the country’s fiscal and other macroeconomic realities.

The coalition A Partnership for National Unity/Alliance For Change (APNU/AFC) Administration has since signalled its intention to resuscitate a decade old draft debt management bill for enactment.

This position is documented in the recently compiled Public Debt Report for 2015, compiled by the Debt Management Division (DMD) of the Ministry of Finance, under the aegis of Substantive Minister, Winston Jordan.

The critical assessment of Guyana’s debt status quo has since pointed to the need for consolidated debt management legislation in conformity with international best practices.

The ministry in its Report has documented that the Fiscal Management and Accountability Act (FMAA), promulgated by the previous administration, did attempt to fill some of the gaps in the legislation.

That Law identifies the Ministry of Finance as being principally responsible for managing the public debt and cash-flow as they pertain to the Treasury functions.

“However, this Act still needs further elaboration regarding the management of borrowing, lending, investments and guarantees,” according to the Ministry’s findings.

Debt ceilings

The Ministry did find in addition, that the existing legislation does not require an approved medium-term debt strategy being linked to a high-level debt management objective, expressed in terms of the cost-risk borrowing preferences of the Government.

It was found too that currently, the debt levels and ceilings catered for in the existing laws are not in fact linked to fiscal and macroeconomic conditions:

“There is also no requirement for the involvement of the Parliament or the Cabinet in the drafting or approval of the National Debt Strategy and; no guidance regarding the organisational structure for debt management, the roles of debt management officials and their relations with fiscal, monetary and other agencies.”

The Ministry’s DMD found too that current legislation does not address the public dissemination of information or the flow of information among agencies regarding the public debt. Transparency in debt management operations is an integral component of sound debt management practice.

According to the Ministry’s Public Debt Report, “while the existing legal framework provides for the auditing of loans, there is no requirement for the specific auditing of the DMD and its debt operations.”

It was highlighted too that there is no provision for the evaluation of debt management activities and outcomes against goals and objectives in what is called performance auditing.

The Ministry said sound practice in public debt management requires the auditing of public debt management operations, especially activities related to the formulation of the debt strategy, recording and accounting for debt, debt system administration, and management of loan records.

Legislative weaknesses

In terms of weaknesses in the existing legislation, it was found that there is no single consolidated debt management legislation to prescribe the conduct of debt operations consistent with internationally accepted tenets of sound public debt management.

It was observed that while there is legislation which governs the issuance of loan guarantees and on-lending, there is no corresponding operational policy or procedure that details the on-lending process.

“There is no mandate within the Primary Legislation to prepare a Debt Management Strategy that makes the government’s high level debt objective operational.”

It was found too that the Law does not mandate annual reporting to the Parliament on debt management activities, including evaluation of debt management performance against established strategic benchmarks and a formulated and approved debt management strategy.

“Primary Legislation does not specifically mandate that external audits be carried out on debt management activities…There is no single annual borrowing limit linked to the broader economic or fiscal performance; rather, there are several limits applied to different types of instruments under various Acts, eg, External Loans, Domestic Loans and Loan Guarantees.”

The debt management division found too that there are no articulated roles and responsibilities of entities associated with government debt management, including other ministries, Bank of Guyana and Parliament.

Further outlining the weaknesses in the existing legislation, the Ministry’s debt management division found that there is no requirement for external auditing, compliance or performance auditing of debt management operations.

There is also no high-level Public Debt Management Committee or similar decision making committee that provides oversight of debt management operations and acts as advisor to the government on debt related matters, according to the 2015 Report.

With regards the improvement of the existing legislative framework, it was pointed out that with the help of an Inter-American Development Bank- funded Consultant, a single Public Debt and Aid Management Act and Regulations were drafted in 2006.

This draft legislation was never enacted and according to the Ministry, “there are plans in place in the second half of 2016, with external assistance from the Commonwealth Secretariat, to have the draft Public Debt and Aid Management Act and Regulations reviewed and updated.”

According to the Ministry, once the current debt legislation is revamped and the several existing Acts are replaced with a single Public Debt Management Act, this legislation should be enacted in the near future.