Solicitor general settles 'debt guarantee' quarrel
November 20, 2005
SOLICITOR general Michael Hylton has advised the Ministry of Finance and Planning that all government guarantees must have prior parliamentary approval. The only exception is where there is no possibility of resort to the Consolidated Fund for the settlement of the debt.
In a letter to administrative head of the ministry, Financial Secretary Collin Bullock, and copied to finance minister Dr Omar Davies, the solicitor general said that any instrument or agreement whereby the government, not being the primary debtor, is legally liable to pay a debt in the event of a default by the primary debtor, constitutes a guarantee whether the word "guarantee" is used or not.
"The government can guarantee loans to public bodies without parliamentary approval where there is no possibility of resort to the Consolidated Fund for the settlement of the indebtedness, that is, where the government has identified a specific fund or source other than the Consolidated Fund, to pay the indebtedness in the event that it is called upon to do so, pursuant to the guarantee," Hylton advised. "In all other cases, government guarantees will require prior parliamentary approval."
The solicitor general's advice was required to settle the issue of the prevalence of letters of guarantee issued by the ministry in recent years without parliamentary approval.
The matter was championed by the chairman of the Public Accounts Committee (PAC), Audley Shaw, who is also the Opposition's spokesman on finance and the public service.
Shaw had pointed to the amendment to the Financial Administration and Audit Act (FAAA), which requires the minister to place the information on the table of Parliament, on or about the time of granting the guarantee, or as soon after it has been arranged.
In raising questions about these off balance sheet transactions, Shaw pointed to the supplementary estimates introduced by Davies in December, 2004 which, he said, amounted to "$11 billion in principal and interests on contingent liabilities that were guaranteed in various forms, outside of Parliament, through letters of guarantee and deferred financing."...
Author: Balford Henry
Source: Jamaica Observer
