Explain or Resign

Maltastar 

 9^th December 2002

 

“This reflects Government’s declared policy not to provide any further security or comfort or other form of undertaking to credit or loans raised by public entities.”

This solemn declaration is found in Appendix C to the budget speech read by the Minister of Finance on 25th November 2002. It leaves no room for interpretation. The Government pledged not to provide guarantees, letters of comfort or undertakings to cover borrowings made by publicly owned enterprises.

These two paragraphs is how I started my weekly back-page article last Friday in the Malta Independent. I explained how this false declaration was made in Parliament in the Minister’s Budget Speech for 2003 when in fact we had proof that the government had issued Lm15 million guarantee for a loan to Foundation for Tomorrow’s School from APS Bank and Bank of Valletta’s annual report for the financial year to 30th September 2002 show an increase of Lm42 million in government guaranteed loans during the financial year.

 

 

That same evening my colleague Leo Brincat in Parliament threw more light on the matter and laid on the Table a list of government guaranteed exposures at BoV which is effectively controlled by the government. At BoV, the government appoints the Chairman and the Chairman basically controls the appointment of the remaining directors except for the director representing Banco di Sicilia and the director elected by the workers.

“Minister Dalli cannot take cover in flimsy arguments to hide his guilt. He made a false declaration in parliament and needs to explain or resign.”

It results that during the year the government also issued guarantees for new exposures to the Medical Foundation building the Mater Dei Hospital for Lm25 million, Gozo Channel for half a million, and Malta Desalination for Lm1.057 million. This is by no means an exhaustive list. I only picked these names as in the last Report of the Auditor General for the year 2000 these names do not feature in the list of guarantees issued by the Malta Government. (Report of the Auditor General – Public Accounts 2000 page 81). So these guarantees were issued during 2001/2002 (no such guarantees were issued in 2000 according to the Auditor General’s said Report) not much before the Minister was making his solemn false declaration to mislead Parliament.

Writing in the Sunday Times yesterday, the Minister rather than give due explanations, just accuses Mr Brincat for getting hold of confidential information and exposing it in parliament. What a cheek!! Since when government’s liabilities in the form of contingent guarantees, has become private secret commercial information? If Mr Brincat was exposing the private affairs of some individual or private company I could possibly be inclined to sympathise with the Minister’s arguments. But all the listed company’s are public owned companies owned by the government in name of the nation. The information should have been volunteered by the Minister in Appendix C to the Budget Speech rather than making a false declaration that no more guarantees, letters of comfort or undertakings were being issued.

Hopefully the Auditor General Report for the year 2001, normally published around this time, should throw more light on the matter. But it is significant that Min Dalli could not defend himself from the accusation of false declaration and instead chose to sheepishly and ineffectively take cover in stupid counter-accusations that Labour was making use of privileged commercial information when in reality this is not so.

If Min. Dalli wants to deprive us from the right to know the true state of finances and contingent obligations of the State than one can imagine the reluctance of the Bank of Valletta and of the Central Bank of Malta, clearly both under the influence of the Minister of Finance, to resist passing the case of Daewoo for criminal investigations by the Police.

Let me make a declaration I have made in the past and I make again with all responsibility of three decades plus practicing the banking profession, especially in the lending and credit control function. There is no way that in the ordinary course of its business that a serious bank like BoV would build an exposure in high seven digits against a car importing company owned, controlled and managed by a single person without any track record and without covering collateral. No way! Something went out of the ordinary course of business in the approval of such exposures and it needs to be investigated. Certainly a new Labour government would order such an investigation and hope that there is still enough evidence left to expose who was responsible for such irresponsible behaviour, if not outright fraud.

Minister Dalli cannot take cover in flimsy arguments to hide his guilt. He made a false declaration in parliament and needs to explain or resign. But then false declarations to parliament and to the nation have become the order of the day. Financing off budget through government guaranteed bank loans social capital expenditure as that related to the Mater Dei Hospital and Government Schools, an investment that will never generate one lira of revenue, is nothing but making a continuous false declaration on the true state of the structural fiscal deficit.