False Declaration

The Malta Independent



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.

I opened the desk drawer and pulled out my magnifying glass to ensure that I was reading correctly. Because in the other hand I was holding a copy of a facility letter of Lm15 million loan from APS Bank to Foundation for Tomorrow`s School which is secured by a government guarantee. Attached thereto is also the Ministry of Finance approval for this loan and their agreement to provide the required guarantee.

`The Government pledged not to provide guarantees, letters of comfort or undertakings to cover borrowings made by publicly owned enterprises.` I therefore demand an explanation why Parliament was purposely given the wrong information or better still was given a false declaration.` In serious democracies purposely misleading Parliament is a sufficient cause for demanding the resignation of the offender.

But as it turned out this was just the tip of the iceberg. The detailed Financial Statements of Bank of Valletta for the financial year to 30th September 2002 were published almost concurrently with the budget. On reviewing them I came across some useful information in note 36 on page 28 under the heading Related Party Transactions.

Bank of Valletta is still owned 25.3% by the Malta Government who has the right to nominate the Bank`s Chairman. As such the government is technically a related party to the Bank and therefore accounting standards demand detailed disclosure of the Bank`s business with the Government as a related party.

Through this note we learn that the Bank had facilities covered by government guarantees which increased from Lm60.3 million as at September 2001 to Lm102.5 million by September 2002. `Bank of Valletta is still owned 25.3% by the Malta Government who has the right to nominate the Bank`s Chairman.`

So whilst the government is making a false declaration that it has a policy not to issue such guarantees, effectively it increased its guarantees to Bank of Valletta alone in respect of borrowings by publicly owned entities by Lm42.2 million.

It also results that overall borrowings from BoV by such entities increased by Lm33 million during the said period so effectively the guarantees increased more than the increase in the borrowings.

Rather than continue exposing vintage arrogance, typical of an overstay in power, Minister Dalli would do well to offer his explanation for the false declarations he made to parliament in the solemnity of the budget speech for 2003.