Zenawi again rejects auditor general’s report

By Bruck Shewareged (Reporter) Once again, the auditor general’s report, which ticked the government off last June, was a focus of hot debate in parliament on Tuesday when MPs discussed a motion by the ruling party to adopt an inquiry commission report which, according to the government, exonerates it from a damning report by the auditor general that said it over-borrowed from local sources.

Last June, PM Meles Zenawi told parliament of his disappointment in no uncertain terms about the auditor general’s report which said that government breached its own law when it borrowed in excess for the 1998 Ethiopian year (which falls between September 11, 2005 and September 10,2006) from local sources.

Back then PM Meles said that the auditor general made a mistake that even a junior accountant was unlikely to make. The 1998 Ethiopian year budget proclamation put a limit to the amount of money that the government can borrow from local sources, i.e. direct borrowing from banks or by selling bonds and treasury bills.

The government argued then that it did not pass the limit when it borrowed from local sources, and said that, in fact, the amount it borrowed was significantly less than the limit put by the budget proclamation.

PM Meles then proposed the setting up of an independent inquiry committee to investigate the report and find out whether the auditor general made a mistake when it concluded that government excessively borrowed. Back then, opposition parties opposed the move. But the ruling party, owing to its majority seat in parliament, was able to have a decision adopted in parliament to set up a five-man committee which submitted its report to parliament on Tuesday.

The committee was tasked to address three issues. The first one was to identify how much money government could borrow from local sources in the stated budget year. The second one was to determine exactly how much money the government borrowed during the fiscal year. And the committee’s last task, which was also later raised controversy, was to determine whether the government exceeded limits of borrowing in the said year in light of the budget proclamation of that year.

The committee said that for the 1998 (E.C) budget year, the government could borrow up to 12.195 billion birr from the sale of bonds and treasury bills and direct borrowing from the banks, taking into account the previous average income for three years.

The government, according to the committee, took 6.948 billion birr in the form of gross borrowing during that budget year. The inquiry committee’s report also said that government’s net borrowing for the stated fiscal year amounts to 2.889 billion birr.

While the inquiry committee gave clear-cut answers to the first two questions given to it by parliament, its response was rather ambiguous towards the third question, i.e. determining whether the government borrowed excessively from local sources.

The committee’s approach to the borrowing was two-pronged. It first said that if it is about net borrowing, the government borrowed only 69 percent of what it was allowed by the law. But if one takes gross borrowing into account, government breached the law by borrowing 65 percent more than what was allowed in the budget proclamation.

The committee blamed the budget proclamation which was ambiguous in character. It concluded that it is difficult to determine whether the government over-borrowed or under-borrowed. The inquiry committee’s report did not find the auditor-general’s report wrong also. In fact, the committee said that the report was acceptable. It rather found the problem in interpreting the budget proclamation by the two sides, i.e. the government and the auditor general.

While the ruling party interpreted the inquiry committee’s finding as favorable, opposition parties strongly opposed it. The ruling party interpreted the finding as saying that it exonerates the government from the accusation that it over-borrowed.

Not so, with the opposition. Legesse Birratu of the Coalition for Unity and Democracy (CUD) said that the inquiry committee’s report was ambiguous, to say the least.

Ato Worchofa, a representative from the United Ethiopia Democratic Forces (UEDF), said that his party in the first place strongly opposed the establishment of the committee. He also said that not all members had put their signatures on the report (Hashim Mohamed’s signature misses). Moreover, Worchofa added, only two of the whole committee members are present, and asked why that was the case. He said that the auditor general’s report was correct and he should, in fact, be asked for an apology.

Perhaps the harshest comment came from Ethiopia Democratic Union Party (EDUP-Medhin) chairman Lidetu Ayalew. He told committee members that while he commends them for answering the three questions asked by parliament, he wondered why they had to venture into areas where they were not mandated to look into.

“The problem with the report is that the committee tried to raise questions itself and answers them. These questions were not asked by parliament,” Lidetu said.

Lidetu told committee members that nobody had asked them to raise the question of net or gross borrowing.

“You were talking about the effect of government borrowing on inflation. Who told you to do that? Who told you to defend the government?” Lidetu chastised the committee.

Ato Bulcha Demekesa of the Oromo Federalist Democratic Movement (OFDM) also expressed his disappointment with the committee. He said, “I’m sorry. But there is no single professional in the inquiry committee.”

Bulcha explained that there is a misunderstanding on government’s reserve by committee members. The committee took the reserve into account when it calculated the net borrowing. Committee Chairman Hailemelekot Tekleghiorgis said that the net borrowing is the gross borrowing minus the reserve.

Bulcha, who served as deputy finance minister during Emperor Haile-Selassie’s time both as president and until recently as board chairman of the Awash International Bank, argued that there is no such thing as “government money” since these accounts are owned by different organizations. “It’s just because all the money in the National Bank and Commercial Bank of Ethiopia will be taken as ‘government money’ for a minute or two between the last day of the current fiscal year and the next one. So it is wrong to take this money into account when the net borrowing was calculated by the committee.

Parliament wrapped up its session by adopting the motion by the ruling party, which said that the report had exonerated the government from the accusation that it had over-borrowed. EDUP-Medhin’s Lidetu argued against the motion on the ground that it took only one part of the committee’s conclusion since it had concluded that both the government and the auditor general were right in light of the approaches that each followed.

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Posted by on November 11, 2008. Filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0. Responses are currently closed, but you can trackback from your own site.