NATIONAL PARLIAMENT OF
PUBLIC ACCOUNTS COMMITTEE TRANSCRIPT
Inquiry into the 2007 Supplementary
Appropriation Bill 2007 - Head 273: Ministry of Finance and Treasury
(Uncorrected
Version – subject to changes upon revision)
Chairman: Ministry
of Finance had used $6 million in the form of Contingency Warrant and is asking
for an additional $5 million in the development section of the Supplementary
Bill. The Permanent Secretary of Finance
is here to help us understand how this money has been used. I would like to welcome the Permanent
Secretary. Thank you for coming and
thanks for your time. I will give you
this chance now to explain these figures for us.
Permanent Secretary: Thank you
Chairman and members of the Public Accounts Committee. On Page 10 of the Supplementary Bill the main
supplementary that we are asking is refund of previous years’ revenue. The initial originally estimated is $1.6
million then we ask supplementary to $6 million. What is happening this year is that the Tax
Inland Revenue Division has increased or has done a lot of compliances. As a result of that they are now doing the
assessing of the businesses. When they
have done the assessments there is some refund that is to go and there are
others that need to pay so that is why we are asking for that. This is mainly for tax refund. The other reason for the increase for the
previous years is mainly for the special constable issue. They are also part of
this issue so we are also paying them off.
This is the provision that we can foresee. As we increase the compliance there might be
an increase on the previous tax. So that
is why we are asking for that $6 million that …….
On Printing, remember this year’s
budget was done this year so that is why we use the budget for this year for
printing this year’s budget. We have
used the provisions for this year so that is really for printing and we are
asking for $300,000 so that we can print the 2008 Budget for 2008. So that is really why we are asking for
supplementary for these line items.
If I may go to the development
budget on page 21, this is the rural credit guarantee and banking extension
project. We have used $15 million. $10 million goes for the guarantee scheme, $5
million goes for the rural expansion which was won by ANZ and we will sign it
on Monday next week, and that gets $15 million out and the $5 million is for
the equity scheme that will go to the rural people. So that is basically why we are asking for
the $5 million supplementary.
Thank you Chairman.
Chairman: Thank
you. Here is the presentation from
Finance, any concern or question that anyone would like to ask?
Hon Boyers: I think
previously with the supplementary funding so relevant to revenues and I think
we are going to request a projection of revenue focus for just by the
expenditure, I wonder if we could be furnished with the copy of the projected
surplus revenues.
Chairman: One of the
concerns we raised earlier on was the effect of this Supplementary Appropriation
on our reasonable budget. Are these
figures supported by collections or are we going to create deficit?
Hon Boyers: The question
I asked is because the government is still committed in its agreement to a
fully funded budget in relation to debt servicing management …..so I think that
is important.
Permanent Secretary: Thank
you. I will table it through the
Secretary the actual expenditure and revenue up to June. I will give it to him so that he checks the
addition first before he gives it to you.
It was only completed today. I
actually worked hard with them so that we can present it to you. So that will take you up to June.
The focus revenue for up to December
we are expecting $108 million revenue.
We will give you a formal written on this. Out from that $108 million, $16 million would
be for debt management or debt servicing …..this 50%. Which means what is available is $92 million
out from that $108 million and this bill is $83 million, which means this
supplementary is fully funded according to our focus and we have extra $9
million.
Chairman: That amount
is the additional amount you are focusing, additional to the original?
Permanent Secretary: Yes,
additional to the original. In fact
revenue is growing. I think we are
collecting well for this year so far.
Hon Boyers: In relation to
that revenue most of our revenues are from loggings. The present logging markets ……..to remain that way for quite
sometime. Has it been taken into account
in the focus revenue? What sort of
relationship does that have in the revenue?
Permanent Secretary: The focus has
been the same from the beginning. But
most revenues actually come from compliance in the Inland Revenue. That is really where the strength of the
revenue comes at the moment so it does not relate more on logging activities at
the moment. That is why this tax refund
is quite important on this issue because it circulates the money. At the moment the strength is more focused in
the Inland Revenue.
Hon Boyers: So the
Customs position in relation to this?
Permanent Secretary: It is more
the same.
Hon Boyers: It is focused
on the same for the last six months?
Permanent Secretary: Yes.
Hon Boyers: Are there any allowances there or not? This is just focusing that position?
Permanent Secretary: Yes.
Hon Fono: Mr Chairman,
as requested we would like to see that in a kind of submission to the Committee
in writing?
Permanent Secretary: Yes.
Hon Fono: Now
concerning this rural credit guarantee scheme.
Has it already started? I got
some information from the local people who approached their commercial banks
that the commercial banks have not yet accepted this.
Permanent Secretary: As of
Wednesday I think the commercial bank rang me up and they were asking for …
Hon Fono: All three
commercial banks?
Permanent Secretary: Just ANZ.
Hon Fono: Just
ANZ?
Permanent Secretary: Yes.
Hon Fono: Not NBSI and
Westpac?
Permanent Secretary: I have not
really talked with them.
Hon Fono: They are not
facilitating this guarantee scheme.
Permanent Secretary: I have not
really talked with them to know what happened with them. I am more just reporting what I learned from
ANZ. What I am really saying here is the
guarantee scheme is there. The $10
million is with the Central Bank. What
is missing is the equity part so that is why they are sort of slowing
down. There are a lot of applications
who do not have the equity so this $5 million will kick off that. With that what I am saying is they have not
implemented this scheme yet.
Hon Fono: That is
exactly what my point is. As of last
week some potential borrowers were turned back by their commercial banks
telling them that the government has not entered into an MOU with the banks so
that this scheme becomes effective. Now
we are in the eighth month of the year, only four months to go before the end
of the year and this guarantee scheme or this rural credit scheme is still not
in operation.
Permanent Secretary: We are
signing the MOU with ANZ on the expansion on Monday. I have talked with the Central Bank last week
I think and they are facilitating that.
Hon Fono: But that
expansion is going on the rural banking line like what they did here in
Permanent Secretary: Yes, that is
for ANZ. I am talking with the Central
Bank. The Central Bank is working on
that.
Hon Fono: Referring to
other commercial banks on this rural credit scheme. At the moment they have not yet implemented
this so what are we telling our people?
Permanent Secretary: What I am
saying is we have talked with Central Bank so it is them and the banks that
should talk this time.
Hon Fono: So is it true
that they have not signed any MOU or any understanding at all to implement this
government programme?
Permanent Secretary: Whether it
has been signed or not but the money is there.
Hon Fono: There must be
some MOU between the commercial banks, Central Bank and the government, the
Ministry of Finance, in order for the bank to facilitate this scheme. The risk
is there for the banks and they have to sign an MOU with the government and
Central Bank before they implement this scheme.
Otherwise nothing happens to a lot of promises to our people. It is already end of the year and we are
looking towards the new budget next year.
So if there has been no MOU then the government is not serious at all in
implementing this scheme.
Permanent Secretary: It is in the
process.
Hon Fono: This scheme
is not new. Previous successive
governments had guarantee loans too with Central Bank not only to help business
to start but marketing, help exporting companies to do market under the
guarantee scheme. And what the banks are
saying is there needs to be an MOU between the government, Central Bank and the
commercial banks, and you are telling this Committee that it was only ANZ that
you talked with. What about the other
two banks so that it covers the three commercial banks and what the government
policy is, is implemented. Otherwise I
am afraid that this scheme will not be implemented this year, and next year
when we look at the budget we will see another guarantee scheme in there
again. Now can you look at not only the
guarantee but cutting back on the interest rate? Interest rate is one factor that discourages
a lot of borrowers - high interest rates on commercial loans or industrial
loans. Why can’t you look at subsidizing
the interest so that it gives the borrower to repay only the principle loan?
Chairman, I am raising this because
it is a way of publicizing the policy of the government in line with the bottom
up approach and people are still waiting for it in the rural areas. People are still waiting for it. It is good for the government to tell the
people to do it otherwise the money will be at the Central Bank and nobody will
be borrowing from the commercial banks and using it as a guarantee because
banks do not want to lend it out because of that risk and the government does
not have that understanding or kind of agreement with the commercial banks,
Central Bank and the government. That is
the missing link, I am told by those who have approached their commercial banks
for this guarantee.
Permanent Secretary: Well the good
sign is that we are signing things. The Bank of the South Pacific comes into
play this month so I am pretty sure this scheme will start to kick off this
month. That is practically what can
happen in all these schemes. I mean
practically that is it.
Hon Boyers: Are you not
happy with the process PS?
Permanent Secretary: Well we are
giving it to the banks to look at it and from the Ministry’s point we would
like to see which sectors those things are going so that the banks continue on
with what they normally do. Finance
looks at what other sectors and what are the outcomes that comes out from there
and let the financial service do what they are doing. So it is coming.
Chairman: I would like
to touch on a point raised by Honourable Fono.
I think you should be dealing with the banks on legal footing. I mean
you should deal with ANZ because it appears you are promoting ANZ.
Permanent Secretary: ANZ is only
for the expansion.
Chairman: I am not
worried about the banks I am worried about the customers because every one of
us bank on different banks.
Permanent Secretary: What I am
saying here and why I mentioned ANZ is just because of this rural expansion,
the tender. That is the why I mentioned
that. With the other two or the other
three banks it is Central Bank with them.
I will be dealing with the Central Bank.
So that is how this happens.
Hon Fono: So haven’t they
come back to you on that MOU?
Permanent Secretary: We had a
formal talk already and the process is going.
So Finance and Central Bank have talked.
While I am saying that there are other people who will be saying no it
hasn’t but internally we have talked and we know what we are doing so it is
coming. As I have said, practically by
this month it should be on that.
Hon Boyers: I think with
the ANZ it initially started with the rural banking services. ………….with the
other banks since then you see ATMs and more ……spread of competition out in the
rural areas so I think this might have similar effect ………….
Chairman: So you are
saying that by this month people should go to the bank and apply for this
one? What happens if that does not
happen next month?
Permanent Secretary: Go to the
bank.
Hon Fono: Are you aware
that the rural people are really frightened of the banks?
Permanent Secretary: Well that is
the institution that we have.
Chairman: PS, are you
aware that there are some vehicles that have been brought into this country and
they are looking for money to pay for it?
They are going to be knocking at your door. Are you ready to pay them?
Permanent Secretary: No, I am not
aware of.
Chairman: We understand
that these vehicles have been brought in outside the normal process and I’m
sure they will bulldoze them for them to pay them.
Permanent Secretary: As long as
they are budgeted for.
Chairman: The advice
from this Committee is you stick to the figures in the budget.
Permanent Secretary: Exactly.
Chairman: There are no
more questions and we are quite happy.
Thank you PS for coming.
Hon Fono: When will the
information that we required be produced to the Committee?
Permanent Secretary: On Monday.
Hon Boyers: Just one more
question. Is this injection of funding
coming in it is going to be like a ……….position to finance at the end of the
day? This injection of funds coming in
equity. I mean that a set amount for
this year? There is no roll over
position for next year.
Permanent Secretary: You might
have another $5 million.
Hon Boyers: Is that the
case or was it not the case because I know in the development estimates there
is usually a case of non expenditure or roll over on to next year …………next
year’s budget.
Permanent Secretary: This is for
this year. Next year is..
Hon Boyers: So it is
going to be expended either?
Permanent Secretary: Yes.
Chairman: We expect
funding of this year would have exhausted the full development amount and will
ask for some …..
Permanent Secretary:
Hon Fono: Chairman,
just a general question on some of the budget allocations in this year’s budget
under development ministries as to the reasons why there is delay in
implementing them. I make reference to
the $3 million allocation under the Agriculture budget for cocoa and coconut
rehabilitation. Projects have been
submitted they are still waiting for the release of funds to those individual
project applicants. The reason was that
Finance has not released the money. The
same applies to the Fisheries projects.
Permanent Secretary: Did they tell
you that? They should send the payment
voucher down to Finance if those Ministries tell you how the mechanism they are
going to..
Hon Fono: Chairman, I
am just wondering why have they delayed the implementing these projects. We are now in the eight month of the year,
only four months left then the budget will be closed and we have not
implemented those project funding. What
are the reasons for the delay?
Permanent Secretary: Basically
Ministries budget is there. Implementing
Ministries have not really worked.
Hon Fono: Your
explanation if they are here, those accounting officers or the directors of
those departments they would talk differently.
They have submitted payment vouchers and Finance needs to release
payments.
Permanent Secretary: If they come
just call me so that all of us are here to talk about this.
Hon Fono: It is problem
not only under this successive government on the implementation of those
projects.
Permanent Secretary: If you look
at the successive budgets of governments, first is the project or development
project that is there. Okay that
implementing part of it is sort of missing.
I will give you some examples especially on money that ROC has
given. When it comes and if you directly
give it to them, ROC will ask us to report it.
And it is when reporting that is hard so that experience has been
experienced by Finance. That is why
Finance asks a lot of question to say where is this going? Who is this?
How is this? So that asking of
questions makes the Ministries to sort of slow down. But what I am saying here is so that you can
relate the spending of that money to an output or something that you can
measure and see. That is the one that we
are still working on to make that improvement.
Hon Fono: So have you
had any opportunity to convey those requirements through meetings with various
accounting officers or Permanent Secretaries from the line Ministries?
Permanent Secretary: The
development committee actually met since June.
Hon Fono: How many
days?
Permanent Secretary: Every
month. As from June July that is the
second meeting now and they have been talking about this now so I’m sure this
month going forward there will be something happening. So the development committee is actually
asking these things now.
Hon Fono: If accounting
officers of line Ministries are not following the requirements that Finance
puts then one can only conclude Chairman, that they are not fit to work there
because the implementation of these programmes are very important. It reflects a government that is inefficient
to provide the delivery of government services and implement the government
budget that Parliament has passed.
Permanent Secretary: All I can say
now is that the signal of the indicators that the public and everyone should be
made aware of is that Finance is now starting to do this exercise. So surcharge is not just on vehicle or things
like that, but it will go into those projects and implementation of those
programmes. The signals are coming.
Hon Fono: Who is going
to pay for the surcharge?
Permanent Secretary: The person
who is not doing his work. It applies to
all public servants.
Chairman: Last one from
me. I noticed that you are not asking
for and you are not expecting to incur any more recurrent, you are not asking
anymore supplementary recurrent.
Permanent Secretary: The emphasis
this Ministry is looking on is ‘work within the total budget’ that I have and
make whatever provision there and vire money and what not.
Chairman: So you are
not banking on the contingency warrant?
Permanent Secretary: Only $5
million ….
Hon Fono: They have
enough for the Ministry at the first place so they do not need any extra.
Chairman: That means good
management.
Chairman: Well if there
is nothing else then thank you Permanent Secretary again. Thank you for coming.