When it comes to standards of disclosure and transparency in reporting and recording our external debts, the famous expression about ‘known and unknown knowns’ by the former US Secretary of State Donald Rumsfeld immediately come to mind.
We have expensive commercial debts that we know we owe. We have debts we don’t know we owe and debts we don’t know that we don’t owe. We must make high disclosure standards on our external debts a top priority of policy. I say so because misreporting of external debt has made debt the new frontier of corruption for the rent-seeking elites in Africa.
The most famous recent case is what happened in Mozambique where two large previously unreported and hidden external loans were discovered only after the International Monetary Fund intervened (IMF) to force the government in Maputo to allow an independent audit of the external loan records. This is how the famous Tuna bond scandal came about.
How are we faring in terms of disclosure and reporting our external debts? I must admit that the National Treasury has lately effected some improvements? They have just published external debt registers on loans outstanding as at June 30, 2020. Until the other day, the data was very old.
It does not surprise that the new external debt data has been put out just weeks ahead of this year’s World Bank and IMF meetings that opened in Washington this week. As we know, the IMF has been piling pressure on the government to up its game on reporting and auditing public debt.
Yet the levels of transparency in our external debt registers are still woefully low especially when it comes to disclosures on security contracts. Huge debts from security contracts are still being recorded without important details such name of the creditor, repayment terms, and reasons for the borrowing. The only information disclosed on these big liabilities is that the money has been borrowed for ‘various security related contracts’.
It begs the question: If we allow the National Treasury to get away with not providing facts as basic as the name of the creditor on these security contracts, what would stop corrupt elites from hiding dodgy debts by recording them in the register as ‘various security related contracts’?
Enough of lies, damn lies and statistics, as the famous British Prime Minister Benjamin Disraeli once said. When it comes to public debate on the nation’s indebtedness, the biggest problem I see is dearth of fresh ideas on what must be done to save the country from suffering the ignominy of an imminent external debt default.
We have diagnosed the problem sufficiently. But apart from glib and run-on-the mill ideas about how to ‘restructure’ our debts and negotiate debt waivers, little is coming through in terms of new ideas.
The point is, if you want to stop a drunkard from abusing alcohol, the first thing you do is take the bottle from him. The genesis of our parlous debt situation is the fact that we have been running a primary debt deficit on the budget since 2013. Put simply, our expenditure exceeds revenues even before you factor in debt service. It’s a structural problem that requires structural solutions.
Take away the bottle
But where are the institutional solutions to get us out of this mess? We have been talking about establishing an independent National Treasury Management Agency to take over the responsibility of issuance and redemption of debt from the National Treasury for years.
How else can you take away the bottle from the drunkard? We have been talking about introducing a system of primary dealers for many years. In a presidential system of government like ours, the practice the world over is that you introduce an institution called Office of Management of the Budget. You take way the bottle from the drunkard and put the budget envelope in the hands of the top office on the executive side of government. Why aren’t we debating such institutional changes?
Many centuries ago, the merchants of Venice introduced something called double-entry book-keeping. Why aren’t we debating how to transit the government to modern and transparent accounting? If you don’t introduce modern accounting, you will not know what you owe.
Opacity of public external debt records is at the heart of the problem of corruption in Africa.