ROLE OF PARLIAMENT IN ENSURING TRANSPARENCY AND ACCOUNTABILITY
Speech of Hon. Ibrahim Sorie of the All Peoples Congress (APC) at the Regional Consultation on the Draft Guidelines on Foreign Debt and Human Rights held at the United Nations Conference Centre in Adiss Ababa, Ethiopia from 4th – 5th November 2010.
The Conference was organized by the Office of the United Nations High Commissioner for Human Rights and co-sponsored by the United Nations Economic Commission for Africa.
Hon. Sorie is the Chairman of the Parliamentary Oversight Committee of the Ministry of Information and Communication, Leader of Sierra Leone’s delegation to the ECOWAS Parliament and also Vice Chair of the Legal and Judicial Affairs Committee of the ECOWAS Parliament.
His Excellency Ambassador Andrew Bangali Sierra Leone’s Envoy to the Federal Democratic Republic of Ethiopia, Mrs. Juliana Hawa Fallah, First Secretary and Mr. Abdul Karim Koroma, Information Attaché at the Embassy of the Republic of Sierra Leone in Addis Ababa also attended the Consultation.
Hon. Ibrahim Sorie
PAPER PRESENTED BY HONOURABLE IBRAHIM SORIE
AT THE REGIONAL CONSULTATION ON THE DRAFT GUIDELINES ON FOREIGN DEBT AND HUMAN RIGHTS HELD AT THE UNITED NATIONS CONFERENCE CENTRE IN ADISS ABABA, ETHIOPIA 4TH – 5TH NOVEMBER 2010Chairman, distinguished participants, ladies and gentlemen, I would like to thank the organizers for inviting me to this Regional Consultation meeting on the Draft Guidelines on Foreign Debt and Human Rights.
Like other speakers have mentioned, this topic is germane to our existence, especially for a continent still struggling with debt burden although not as acute as it was in the 80s and 90s; thanks largely to the collective efforts of civil society organizations, such as international NGOs, the World media and performing Artists for their work in exposing and bringing to the world’s attention, the plight of developing countries vis a vis the debt burden and poverty intensification in third world countries worsen by the IMF prescribed Structural Adjustment Programme (SAP).
Mr. Chairman, my presentation this afternoon is going to examine the role of parliament in ensuring transparency and accountability in loan contraction, utilization of loan resources and debt management. A topic I am sure would continue to have relevance to our lives because of its impact on societies around the world. Hence its importance cannot be over exaggerated. My presentation would be based largely on my country’s experience in loan procurement, application, public debt management and the role parliament continues to play in ensuring transparency and accountability in public debt management.
The concept of democracy which my country, Sierra Leone practices in a form of multiparty constituency democracy contains some essential ingredients, including transparency and accountability. Transparency relates to open access to government, political and economic activities and decisions. It enables all stakeholders in a country to see the structure and functions of the government, its policy intentions and fiscal projections, while accountability entails a state being held responsible by its people for its choices and actions. In the context of public financial management, accountability is the obligation on the part of the government to answer for its actions, coupled with its ability to respond to queries from the parliament. More specifically, financial accountability is the relationship between the executive and the legislature based on the government’s fiduciary obligation to demonstrate and take responsibility for performance in the light of agreed expectations regarding the management and use of public funds.
Mr. Chairman, I will now analyse the issue of transparency and accountability in loan contraction and utilization in my country Sierra Leone. Briefly Sierra Leone is a small country in the West African region with a total population of about six million people. The country is richly endowed with natural resources- plentiful deposits of gold, diamonds, rutile, iron ore, bauxite and other minerals which are yet in their discovery stage such as oil. In addition, the country has good climate, vast arable land for agriculture, forest and fishery resources. In terms of human resources, Sierra Leone has an impressive history and traditions of education, being the first country in black Africa to have a university, Fourah Bay College, founded in 1827.
With all the bounty of nature, Sierra Leone is still a poor country and debt ridden, a situation exacerbated by the 11years of rebel war. Corruption and its associated lack of transparency and accountability have contributed to the poor governance regime, which the country experienced mainly before the outbreak of the war in 1991. That today Sierra Leone is still wallowing in poverty and debt distress is a function of bad governance and corruption, challenges we are still grappling with as a country.
However, this situation is changing gradually since the end of the war in 2002. The Lome Peace Accord of 1998 and its subsequent corollaries of Abuja I and II in 2000 finally ended the war and ushered in peace, made provision for key reforms in governance, the responsible use of mineral resources proceeds, and fiscal accountability. Today, Sierra Leone is breaking new grounds in democratic governance, having operationalized the 1991 multiparty democratic constitution and decentralization with local councils in place in addition to a vibrant civil society participation in our governance. Likewise, reforms in the public sector aimed at strengthening states institutions, public financial management and modernization of the economy with the assistance of our development partners are yielding positive results in our overall governance.
Mr. Chairman, human right issues are pivotal in our governance structure as exemplified in the establishment of our Human Rights Commission that is charged with the responsibility of ensuring that our people fully enjoy their political, economic, social, and cultural rights as enshrined in our 1991 constitution.
Mr. Chairman, the immediate post conflict Sierra Leone witnessed an unprecedented inflow of resources both in terms of grant and loans to address prevailing challenges of reconstruction, rehabilitation and resettlement, as well as to ensure improved delivery in basic social services. By the close of the war, Sierra Leone’s total public debt portfolio was already at an unsustainable level. Total debt to GDP was over 250% while total debt service to domestic budget revenue was about 70%, potentially crowding out resources from other critical areas of the economy such as health and education.
The new inflow of loan resources to address the emerging challenges after the war has potential for further slippages into debt unsustainability. This concern was however, allayed with the realization of debt reliefs under the Heavily Indebted Poor Country (HIPC) and the Multilateral Debt Relief (MDR) Initiatives. As a result of the two Initiatives, the impact of debt servicing reduced significantly, thereby providing Government with some fiscal space to address key socio economic programmes that triggered development in earnest.
Such development, however, was taking place in an environment void of sound and comprehensive legal and regulatory framework for debt management. In effect, the existing legal framework for debt contracting and management was fragmented, which makes it extremely difficult to track liabilities across levels of Government in a holistic and comprehensive manner. To say the least, there was Lack of clarity in the roles and responsibilities of the debt management institutions in managing the country’s debt, thus creating a room for manipulation and abuse as could be seen in the existing legislations.
Mr. Chairman, our current legislations on debt management are governed by the following acts:
· The Constitution of Sierra Leone, 1991 (ACT NO. 6 OF 1991)
The legal basis for contracting public debt is enshrined in section 118(3) of the Constitution which empowers Government to raise loans on behalf of itself or any other public institution or authority but only by or under the authority of an Act of Parliament. Section 118(4) states that the authorizing Act of Parliament must provide that the terms and conditions of a loan be laid before Parliament and approved by a resolution of Parliament before the loan becomes effective; and that all proceeds of a loan be paid into the Consolidated Fund or some other public fund created for the purpose of the loan.
· The Government Budgeting and Accountability Act, 2005 (Act No. 3 of 2005)
The Act stipulates that the Minister must include in the Budget documents to be laid in Parliament, a statement of all Government Guarantees to third parties. For the purposes of the Budget, the Government revenues and other receipts include repayment of loans from Government, domestic and external borrowing for financing the budget deficit; and Government recurrent and development expenditure includes, among others, payment of principal on domestic and external debt. This law confers authority on the Minister responsible for finance to make all payments to meet the debt obligations of Government by their due dates whether such payments exceed their appropriations or no appropriations had been made for them, but the Minister must however, report to Parliament within three days of making such payments.
· The Financial Management Regulations, 2007
Under this regulation, the Accountant-General is required to maintain a Register of loans raised by Government and other forms of public debt, including on-lent loans, guarantees, etc.
The Treasury Bills Act, 1964 (Act No. 43 of 1964)
This Act authorizes the Minister responsible for finance to borrow on behalf of Government, by issuing Treasury bills in Sierra Leone. The Minister may authorize the Bank of Sierra Leone to issue such treasury bills. However, the Act limits the principal sums represented by outstanding Treasury bills to not more than Government’s estimated revenues for the current financial year.
The Bank of Sierra Leone Act, 2000 (Act No. 3 of 2000)
This Act empowers the Central Bank to act as banker and adviser to, and fiscal agent of the Government. It also enables the Government to borrow from the Bank of Sierra Leone by way of advances and loans on overdraft. In the case of loans and advances to Government, and holdings of treasury bills and government securities, by the Central Bank, the total of such advances and holdings must not exceed five percent (5%) of the Government’s actual revenue in the previous year’s budget.
· The Government Loans Act, 1965 (Act No. 2 of 1965)
This Act provides for the creation and issuance of registered stock, bearer bonds and Government promissory notes for the purpose of raising authorized loans in and outside Sierra Leone. The Act stipulates that whenever Parliament has authorized the raising of a loan or whenever the Minister responsible for finance considers it necessary to raise money to repay an authorized loan, he may do so by the creation and issuance of registered stock, bearer bonds and Government promissory notes. Finally, it mandates the Bank of Sierra Leone to maintain a register of every issue of registered stock.
· The Development Loans Act, 1992 (Act No. 8 of 1992)
This Act prescribes limits on development loans by providing that the total development loans (including all expenses incurred in connection with the raising of such loans) do not exceed, for loans raised in Sierra Leone, 10% GDP at any one time; and in the case of loans raised outside Sierra Leone, the Leone equivalent of US$500 Million (Five Hundred Million United States Dollars) at any one time.
Mr. Chairman It is against the fragmented and incomprehensive nature of our existing legislations for debt Management that government decided to legislate a public debt management law that is comprehensive and possesses the attributes of a robust system, to guide Government borrowing approaches from the initial stage of debt contracting until the credit is ultimately repaid. Government realized that the first step to ensuring transparency and accountability in loan contracting and other related functions is to have a sound and robust legal framework to guide Government borrowing practices.
The bill entitled “The Public Debt Management Act 2010” is now before Parliament for enactment. This Bill attempts to consolidate all existing laws relating to public debt management taking into consideration international best practice.
The main features of the Bill are:
1. Authorization and borrowing purposes
2. Debt management objective and strategy
3. Procedures for borrowing and other debt management
4. Government guarantees and risk management
5. Lending by government
6. Borrowing by local councils and public enterprises
7. Reporting to parliament
8. Oversight role of parliament
This Bill reinforces the aspect of authorization and the reasons for borrowing, which were less pronounced and incomprehensive in the existing legislative framework for debt management. The reasons for borrowing are outlined in the Bill as follows:
- to finance Government budget deficits;
- to maintain a credit balance on the treasury main account at a level determined by the Minister;
- to provide such Government loans or credits to local councils, public enterprises and any other entity as may be approved by Parliament;
- to honour obligations under outstanding Government guarantees;
- to refinance outstanding debt or repay a loan prior to its date of repayment;
- to immediately protect or eliminate effects caused by a natural or environmental disaster or any other national emergency;
- to replenish the international reserves;
- to meet requests by the Bank of Sierra Leone to issue Government securities for the sole purpose of supporting monetary policy objectives; and
- any other purpose as Parliament shall by resolution, approve.
The above reasons for borrowing are consistent with emerging trends of sound public debt management practices. Robust authorization procedure in debt contracting, funds utilization and the overall management of sovereign debt are well articulated in the provisions of the Bill.
The objective of debt management is clearly defined within the Bill, which amongst other things is to ensure that government’s financing needs and repayment obligations are met at the lowest possible cost, consistent with a prudent degree of risk.
The Bill provides for medium term debt management strategy that would guide Government borrowing and act as a reference for monitoring government debt management activities. The strategy clearly defines the borrowing limit, the nature of loans, as well as prioritizing concessional loans (loans with minimum grant element of 35 percent).
The Bill indicates clear reporting framework and the role of parliament in ensuring transparency and accountability. For instance, the Bill specifies that the minister responsible for finance shall furnish Parliament, not later than later than three months after the end of the financial year, with an annual report on Government debt activities, guarantees and lending. The annual report shall include:
- information on the debt management strategy and its rationale, and how the strategy has been implemented over the course of the year
- information on the contribution of the debt management strategy and debt management activities in achieving the debt management objectives
- a list of all outstanding borrowing to Government;
- a list of all outstanding lending including, among others, a classification of the loans according to their probability of default; and
- a list of all guarantees issued by Government including inter alia, a classification of guarantees according to their probability of being called.
The Bill also specifies that the minister responsible for finance shall publish by Government Notice the terms and conditions of a loan for the information of the general public.
The issuance of sovereign guarantee and risk management is also well pronounced in the Bill. The provisions of the Bill ensure that due diligence and thorough assessment are effectively carried out by Government prior to issuance of sovereign guarantee to minimize default risk and ensure resources borrowed target high returns areas of the economy.
The Bill formalizes an institutional arrangement for public debt management and establishes a debt management division within the Ministry of Finance and Economic Development which assumes lead role in the coordination of debt management activities.
Mr. Chairman in the area of debt management, parliament plays an authorization, oversight and supervisory role, thereby ensuring transparency and accountability. Parliament scrutinises and approves all loan agreements and holds government to account for the implementation and utilisation of the loan resources.
Section 93 and 94 of the 1991 Sierra Leone Constitution empowers Parliament to constitute session departmental oversight committees to supervise policy implementation and strengthen transparency and accountability in the deployment of Government funds, their utilization and tangible performance results. Such functions are often accomplished by field visits, special committee hearings and session reports to the whole House of Parliament.
In carrying out our oversight responsibility we form alliances or partnerships with civil society and other accountability institutions such as the Anti-Corruption Commission, Audit Service Sierra Leone, Office of the Ombudsman and the media. We embark on this arrangement in a bid to enforcing accountability and transparency for the enhancement of human rights and development.
Mr. Chairman, there is still huge room to improve the functionality of the Sierra Leone Parliament by enhancing its capacity to fully deliver on its statutory mandate as lead enforcer of social accountability to improve the welfare and human rights of the general citizenry. The following are imperatives for the effective discharge of our parliamentary oversight function.
- Research, Planning, Monitoring and Evaluation—there is need for the establishment of a robust parliamentary research, planning, monitoring and evaluation committee to:
- coordinate the research needs of parliament; to establish networks and partnership with research institutions and the academia
- ensure that parliament has a robust strategic plan spelling priority intervention in its oversight responsibility over the medium term
- There is need for a clearly and robustly articulated monitoring system in discharging the oversight responsibility of parliament; parliament has a responsibility of ensuring the implementation of all legislations and national policies; there is need for follow up with the executive institutions on the implementation process by parliament to identify gaps in the process and proffer corrective measures where necessary.
- Strengthening Relationship with MDAs:
- There is need for a strong relationship between parliament and the internal control and oversight structures with government MDAs such as the internal audit units in Ministries. Internal audit should be independent as much as they are part of the internal management system of the MDAs. In Ministries, IA units often report to the head of the institutions than reporting to board of directors who are not provided for within Ministerial organization management set up. In such circumstances, there could be risk of influence of internal audit opinion on the financial prudence on Ministries. This is an area Parliament could advocate for strengthening within Ministries and there is need to establish direct working relationship with internal audit, while noting at the same time that the Auditor-General’s Office should have an oversight responsibility of Internal Audit of MDAs.
- The relationship of parliament and the NPPA and procuring entities in MDAs should be strengthened. There is need for parliament perusal of procurement plans of MDAs and to be trained in procurement issues where necessary.
- There is need for strengthened working relations between parliament and Ministry of Finance and Economic Development (MoFED) in terms of the latter participation in the loan contracting process and to be trained in the understanding of basic concepts relating to debt contracting to ensure its effective participation.
Mr. Chairman, in summary, my presentation this afternoon was focused on the role of Parliament in ensuring transparency and accountability in the overall management of public debt. It gave a synopsis of a nation in agony, blessed with abundant mineral and human resources yet at the lower ebb of development and heavily riddled with debt and degrading poverty. It is the agony of a nation that went through turbulent period of bad governance and debilitating rebel war, which exacerbated the violation of human rights, our debt burden and economic condition. This paper also highlighted the efforts we have made as a nation to extricate ourselves from this agony with the help of our development partners. Such efforts can be seen in our current public sector reforms, including reforms in the police and military forces. As a nation that is determined to move away from its unfortunate past of bad governance and embezzlement of public funds with impunity, various measures have been put in place to ensure transparency and accountability in the use of public funds.
In line with the reform agenda, Sierra Leone Parliament over the years has also been playing its watchdog role and in the process forged alliances with civil society groups and other accountability institutions to promote good governance. This has resulted, among other things, in the protection of public interest in debt management and enhancing our people’s welfare including their human rights needs of economic, social and cultural rights. My presentation also gives an outline of the salient features of the new Bill on public debt management, which is currently before parliament for enactment.
The draft guidelines on foreign debt acquisition and management developed by the Human Right Council as a working document for this Regional Consultative meeting is a positive development that Parliament welcomes and wholly embraces. The section that deals with the joint responsibilities of both the creditor and debtor countries in order to ensure fairness, justness and due diligence in loan contraction creates the benchmark for the observance of human rights in debt negotiations. Sierra Leone Parliament will fully support this initiative and would advocate for its adoption.
I thank you for your forbearance in listening to my presentation.
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