GOVERNMENT ACCOUNTING for its deferred financing mechanism should be changed, states the International Monetary Fund (IMF).
In a Public Information Notice for its 2002 Staff Monitored Programme issued earlier this week, the IMF said deferred financing expenditures should be included in the country's budget.
"Quasi fiscal operations" such as deferred financing had "increased significantly," in the last budget year which ended in March, the IMF stated on its Web site. "It is clear that, on an accrual basis, such expenditures should be included in the budget balance."
With deferred financing, private contractors bid for government projects arranging their own financing without any immediate payment from the budget. After the project is completed, the government pays the contractor and takes over the debt which has been incurred in carrying out the project.
The issue of deferred financing was discussed as part of the IMF's assessment of the overall deterioration in public finances last year, with the central government deficit coming out worse than expected.
In the most recent four years, expenditures each year under this scheme were about half of a per cent of the country's Gross Domestic Product (GDP), the level of national production, the IMF said. Such spending added about one and a quarter per cent of GDP to the government's debt stock.
There has been a heated debate locally on the issue of deferred financing. Audley Shaw, Opposition deputy leader and spokesman on finance has accused the government of practising fiscal recklessness through the use of this mechanism. He said last month that the stock of public debt is being increased through the massive road repair programme now under way, but its cost is being hidden from public scrutiny as it is kept it off the budget.
"The policy of government is to confine such special financing methods to major infrastructure projects," said Dr. Omar Davies, Minister of Finance and Planning, in his opening budget presentation during April. This includes road construction, as well as the development of schools, hospitals and police stations.
With the government's increased debt payment obligations, it is useful in helping to maintain the country's infrastructure, Dr. Davies said. During this financial year, $1.8 billion will be added to the government's debt stock through this means.
In the last four years $8 billion has been disbursed through the deferred financing mechanism, of which $5 billion has been included in the official debt stock, Dr. Davies said. The remaining $3 billion will be taken on the central government's account over the next five years.
But Mr. Shaw said by the time these deferred financing bills are due to be paid in four to five years, the roads which have been fixed will need to be repaired again.
Deferred financing "represents an acceptable method to address pressing national needs," Dr. Davies said. "The critical requirement is to put in place appropriate checks to ensure that order, accountability and transparency predominate."
Amendments have been proposed to allow payments on deferred financing to be included in the budget against the relevant ministry's appropriations, the IMF said in its Notice.
