The Minister of Finance, Jacob Jusu Saffa, has said that the government has, in a bid to discontinue the accumulation of arrears, agreed for the Ministry of Finance to undertake incremental structural reforms in public financial management. The reforms will include enhanced budget credibility and tracking of procurement contracts using contract management database.
He made this statement at the Chamber of Parliament on Friday while delivering his budget speech which was themed “Economic Recovery for Job Creation and Human Capital Development in Freetown”.
Saffa cited that, for government to reduce the risk of high debt distress, it should continue to seek grant financing or borrow at highly concessional terms to finance investments in critical sectors of the economy, including infrastructure; limit domestic borrowing within a sustainable fiscal anchor and establish a Debt Management Fund to smoothen the maturity profile and minimize the cost of domestic borrowing; continue to explore non-debt creating financing models such as Public-Private Partnerships supported by a thorough analysis of the potential fiscal risks and without recourse to Government guarantees; pay outstanding and verified arrears subject to the availability of budgetary resources.
According to Saffa, the implementation of the Arrears Clearance Strategy has commenced with the payment of Le605 billion out of about Le1.36 trillion worth of pre-April 2018 to December 2019 crystallized cheques, adding that government plans to pay Le256.7 billion of crystallized cheques and Le132.7 billion of non-crystallized cheques by the end of December 2020 if the fiscal situation permits.
He also mentioned that government would continue to pay outstanding arrears to contractors which are projected at Le147.4 billion in 2021, noting that payment of arrears is expected to enable businesses to resume operations and reduce nonperforming loans in the banking system.
“This action will also inject liquidity in the banking system, which will translate into a fall in treasury bill rates and consequently lending rates. For instance, treasury bill rates dropped to an average of 10 percent as at the end of October from 25 percent in June 2020. If sustained, this will, in turn, lead to a drop in lending rates and thus increase access to affordable credit for businesses,” Saffa said.
By George M.O. Williams
18/11/2020. ISSUE NO: 7953