PAC laments lack of debt management policy
Boitshepo Majube | Thursday April 17, 2014 14:24
For th resulted in debt management being viewed as a simple operation, which did not require high level planning, thhe past four decades, the country has been enjoying comfortable budget surpluses and low levels of debt, whice report states.
As of the end of 2013, domestic debt stood at P6.8 billion from P2.03 billion in 2006, while external debt stood at P14.5 billion from P1.9 million in 2006.
The report states that the Ministry of Finance and Development Planning through the division of development budget has not put a debt management strategy in place.
“In the last five years, things have not been the same as the country started experiencing budget deficits and rising public debt,” the report stated. It states that the committee noted that despite new developments, the ministry continued to operate without a debt management strategy to provide strategic direction and focus in the management of debt. “Further more, there were no well articulated goals and objectives against which performance in the management of debt could be measured,” it said.
The report says, in his response the Accounting Officer indicated that in 2010 he had sought technical assistance regarding debt management strategy from the World Bank and was advised that the country needed to develop a suitable Medium Debt Management Strategy (MTDMS). “The bank provided a report in which it suggested six strategy options to choose from.”
“It was somewhat of a disappointment for the committee to note that for the last three years since the bank issued its report, the accounting officer had not acted on the bank’s recommendations,” it said. It further revealed that the accounting officer stated that he was going to start working on the strategy in September 2013 and would have it in place by March 2014. “He further indicated that the strategy would also include clear debt management goals and objectives as well as a procedures manual which will document debt management processes.”
PAC states that it expressed its dissatisfaction with slow progress on this matter. “It was the committee’s view that a strategy document was very important for institutional memory and guidance,” it stated.
PAC recommended that the Ministry should decide on the strategy option they preferred without further delay.
Concerning the risk management policy, PAC observed that the ministry was borrowing funds both internally and externally and extending guarantees for loans secured by government agencies with a risk management policy to provide guidance when assessing risks associated with various forms of loan finances.
The report says the Accounting Officer also stated the ministry was alive to the risks associated with borrowing and extension of guarantees even though they were not documented.
“He further indicated that a capacity building training for those involved in risk management had been scheduled for September/October 2013 following which a comprehensive risk management policy would be developed,” it stated, further indicating that the policy was expected to be in place by March 2014.
PAC says was not convinced by the accounting officers’ response of being alive to the risks without documenting them because it is always best practice to have strategies, policies, procedures and processes documented for institutional memory as well as for consistency and uniformity. The committee recommended that the accounting officer should update the committee at its next sitting on the progress made regarding development of the risk management policy.