Minister Pillay's Mission Impossible

MINISTER PILLAY'S MISSION IMPOSSIBLE

The major event of the week was the appearance of Minister of Foreign Affairs, Mr Patrick Pillay on SBC, on his way to Tunis to attend the Annual Congress of the African Development Bank (ADB). The public was told that he was accompanied by the new Minister of Finance Mr Danny Faure but he was not featured on camera. Many wonder if Mr Faure, who has spent the last few years as Minister of Education virtually hugging the SBC camera lenses, has suddenly become camera shy.

Mr Pillay gave the impression that his mission in Tunis is to charm the new ADB President, Mr Donald Kaberuka into giving Seychelles his sympathy on its debts with the bank since Seychelles supported his presidential bid. But Seychelles clout in the ADB is minimal. Our voting power, according to the bank’s own rules, is a mere 0.057% of the total eligible votes. Our Minister of foreign Affairs, it appears, has become a creature of the bad habit of buying votes in our local elections, leading him into believing the same applies in the high instances of international institutions.

But Mr Pillay will be surprised to find, if does not know already, when he gets to Tunis, that the debts of our country to the African multilateral banking institution is a much more serious matter. According to the IMF we are in arrears with the ADB to the tune of US$ 41 million as at 31^st December 2005 out of a total debt arrears of US$ 182million. Mr Kaberuka may be the President of the bank it is not his money that is at stake, unlike our country where our President has a different perspective in the handling of public funds.

The ADB’s own report, however, paints a more disturbing picture for them. The bank it seems has overexposed itself to Seychelles. In a report entitled “Seychelles - 2000-2002 Country Strategy Paper” it pointed out that the proportion of our debt to the bank compared to our total multilateral debt was 69%.. According to the bank’s own yardstick it should not have surpassed 35%. And that was in 1999. The main reason for that was because, up until 1999, the bank was lending us money even though we were not paying back the previous loans in time.

Both Mr Pillay and Mr Faure will find the ADB President much more informed about the management of the economy of a country than they bargained for. Mr. Kaberuka was educated in Tanzania and the United Kingdom where he obtained his M Phil (Econ) and a PhD in Economics from Glasgow University in Scotland. He is fluent in English, French and Swahili.

He served as Rwanda’s Minister of Finance and Economic Planning since 1997, and has been widely acknowledged as the principal architect of the successful post-war reconstruction and economic reform programme. He initiated and implemented major economic and governance reforms in the fiscal, monetary, budgetary and structural domains including independence of the Central Banks. These reforms resulted in the widely acclaimed recovery of the Rwandan economy, sustained economic growth and enabled the country to benefit from debt cancellations under the Highly Indebted Poor Countries (HIPC) Initiative in April 2005.

Mr. Kaberuka had 12 years experience in the Banking industry, trade finance, international commodity business and Development issues, before he joined the government.

On the ADB’s books, however, Seychelles has a dismal record. In the “Seychelles - 2000-2002 Country Strategy Paper”, even as far back as 1999, it predicted the decline in our economy unless a macro-economic restructuring programme was implemented forthwith. It painted a picture of an economy that was being criminally mismanaged. And at that time President Michel was the Minister of Finance. The report was an indictment of the ruling party’s record after nearly 20 years in power.

According to the ADB’s document, our country could not absorb all the financial aid available because of a lack of competent manpower which it termed capacity constraints. “The economy lacks adequate local policy formulation and implementation capacity, largely attributable to the shortage of adequately trained officers, especially at the top and middle management levels, which impedes the country from further economic development. Although the islands achieved almost universal primary and secondary education, the country lacks a critical mass of highly trained professionals in various sectors.”

While Government propaganda extolled the high standard of living of the Seychellois based on the misleading GDP per capita figures, the ADB report talks of grinding poverty. The report pointed out that even though we pride ourselves of a comprehensive welfare system, our government’s own findings, which has remained a state secret, was that 27% of families lived in poverty with 7% of them in absolute poverty. And the prospect looks even bleaker for the thousands of women who had to leave school because of pregnancy. These, the ADB warned, will form the future poor households. The ADB called for a revamping of the welfare system is necessary because it serves as a disincentive to seeking work as well as a drain on the country’s resources.

According to the ADB, “a precondition for realising the economic potentials of Seychelles lies in adopting a comprehensive macroeconomic and structural policy package comprising objectives aimed at reducing significantly fiscal (budget) deficits, cutting expenditure, increasing tax revenues, rationalising foreign exchange rate, increasing foreign exchange earnings, reforming social welfare system and improving private investment environment…with a view to promoting economic growth, it is essential to improve the competitive environment for growth led by the private sector. The measures needed to achieve this objective include: further price and trade liberalisation, prudent fiscal policy and realistic foreign exchange policy, removal of bias against small economic actors, and continuing privatisation programmes.”

Even as far back as 1999 the ADB predicted what would happen if the Government did not “negotiate and implement a comprehensive macroeconomic programme to restore economic stability… In an absence of this package, economic growth is likely to further decline in the medium term, fiscal deficits would rise, foreign exchange reserves would be depleted and commercial arrears would increase further.” All these predictions have come to pass.

Perhaps Patrick Pillay and Danny Faure have in their pockets the unconditional agreement by President Michel to accept a restructuring package managed by the IMF, the World Bank and the ADB. In which case it would not matter if, when they return, they claim they have sweet-talked the ADB President to be more accommodating.