By: Kebba AF Touray
The newly appointed Finance Minister has tabled the Central Bank Act 2005 before the lawmakers on 31st July 2018 for amendment. The legislative House contributed, debated, scrutinized and considered the Bill for the necessary amendment, key among those contributions was that of Halifa Sallah’s part of the intervention. Below is the verbatim of his intervention.
Honourable Speaker before a Bill is fit for purpose its introduction must adhere to the dictates of Section 101 subsection (2) of the Constitution, which states that, “No Bill other than a Bill referred to in subsection (5) shall be introduced in the National Assembly unless it is accompanied by an explanatory memorandum setting out in detail the policy and principles of the Bill, the defects which it is intended to remedy and the necessity for its introduction”.
Honourable Speaker, The Central Bank Bill 2018 is indeed accompanied by an explanatory memorandum which is at page 46 and I would recommend very strongly that the Ministers make it a point of duty to read the explanatory memorandum accompanying the Bill in introducing the motion before giving any addition information in order to give further elucidation on the subject matter.
In the explanatory memorandum, the policy and principle of separation of powers and subsidiarity in financial governance are indicated. It is important that an apex institution like the Central Bank must be a financial institution that should not be subjected to any form of arbitrary control in the exercise of its functions. We are told in the object and reasons what the defects are meriting the introduction of the Bill.
Sallah noted that at paragraph 1 it is indicated that the review of the Laws have revealed major vulnerabilities in the Central Bank of the Gambia 2005. These include unclear hierarchy of objects, fiscal dominance and insufficient institutional, personal and financial autonomy provisions. Several instances of noncompliance with the CBG Act occurred in the past for example credit to government beyond the statutory limit and financing to SOEs without statutory authorization.
He added that at paragraph 2 the remedies are indicated. It is stated that the proposed amendment is aimed at aligning the Act to international best practices especially the areas of strengthening the central bank’s governance and autonomy ,enhance quality of financial reporting and external audit arrangement and resolving the current conflict between IFRS and the Acts as per the treatment of unrealized gains and losses.
”Honorable Speaker, it is very clearly stated under clause 85: The Central Bank of the Gambia Act 2005 is repealed and the board of directors is consequentially dissolved. Honourable Speaker that is strange. When you are repealing a Bill there must be saving devices otherwise you going to run amok of what is constitutionally required.
Honorable Speaker, section 161 of the constitution is the ground rule and no law can be made that violates what it states. Section 162 subsection 1 states very clearly that” the authority of the central bank shall vest in the board of directors of the bank which shall comprise a Chairperson who shall be a Governor and Chief Executive of the Bank; and Four other Directors”
In section1 Subsection2 the members of the Board of Directors shall be appointed from a person of standing and experience in financial matters by the President in consultation with the Public Service Commission. Subject to the provision of this section the directors other than the chairperson, shall be appointed for a term of two years and the appointment shall be made with a view to ensuring that no more than two such directors’ terms of office expires in any one year. Such Directors may be re- appointed for a further term nothing more.
Nothing in the statute can contradict the Constitutional provisions. We will see that something is presented to us which clearly contradicts what is stated in the Constitution. Honourable speaker, if we look at paragraph 7 of the bill, it conforms with precisely what is in the constitution, it says the bank shall be governed by the board which comprises a Chairperson who shall be the governor of the banks and four other directors. The members of the board shall be appointed by the president in consultation with the Public Service Commission from amongst persons with extensive academic experience in the field of economics, banking etc., but look at paragraph 18 honorable Speaker. Paragraph 18 page 14 Honorable Speaker said that the bank shall be headed by a governor and two deputy governors. The president shall appoint the governor in consultation with the public service commission and the board.
“That is strange”.
The First and Second Deputy Governors are to be appointed on the recommendation of the Minister. This is also strange and alien to the constitution. In essence we really need to look at the content of the Bill.
What is found in the Bill is also in the Act but I am sure that it is cut and paste from the Act. It is dangerous to cut and paste from previous ACTs Act and then proceed with the rest.
Honorable Speaker it is very clear that we are in the process of constitutional reform. There are certain provisions that are required now, which may not be allowed by the constitution we should push those provisions to be part of the constitutional reform process. They cannot come by the backdoor. This National Assembly is not given such authority to make a law that will violate the constitution of the republic.
Sallah explained that the purpose of repealing the Act is not to deprive others of rights, because acquired rights cannot be deprived. This National Assembly cannot pass a bill that would consequently dissolve Boards and deprive current Board members of their rights to be in office up to the expiry of their mandate. “They are right to be there as per the constitutional requirement, so we must be mindful of any such laws.
Honorable Speaker, the bill is before us out of necessity and practice does indicate that it is necessary to have such a bill before us. The Minister in his budget speech indicated the state of our banking system. We need to take note of the facts. The Minister told us very clearly that whilst the external assets of the banking system increased mainly because of the central bank’s external assets in 2017, the domestic assets decreased. The loans of the banks decreased, whilst their liabilities increased. It is also clear that whilst the domestic banks were lending to government in the past to stay profitable, as a result of policy, the government is no longer going to borrow as it used to. Hence the earing capacity of some banks decreased. There is absolutely no doubt that we are faced with a situation where bank may run into difficulties and will have to be liquidated. This is precisely why regulation by the Central Bank is fundamental Without proper regulation, you will not be able to see the trend, but with meticulous regulations, one could always see danger when it is coming and the banks would be properly guided. It is also very clear that there ARE other institutions like saving and credit institutions. We have been told by the Minister that while the loans advanced by VISACA stood at portfolio was about 13 million their liability was over 14 million. That is no longer viable institution,. What do we do with institutions that are taking deposits but cannot guarantee the depositors return of even of their deposits? We have seen that this is what happened to The Gambia Commercial and Development Bank in the 1990s.This was what happened to the Continental bank. It collapsed
The collapse of the Gambia Commercial and Development Bank is what gave birth to the AMRC that is, the Asset Management and Recovery Cooperation. In liquidating the bank, the Meridian bank took over the good assets of the bank and left the bad ones, which has to be managed before it went into crisis through a managed fund from public fund until it could no longer manage and then it collapsed.
Regulation is the way to prevent such development and the bill is designed to precisely work towards that venture. We will test it to see whether it serves the purpose for which they said it would thus necessitate the amendment of the Act.
Honorable Speaker it is very clear that the Central Bank bill is a bill whose time has come, but in the explanatory memorandum before us, the very sovereign of the land is affronted and that portion should be deleted and should not be allowed to form part of the explanatory memorandum, at least not with my support. It states that under the IMF Staff monitored program, the government of the Gambia is committed to strengthen the legal framework of the central bank in line with leading practices for central bank. Submission of the draft amendment to the central bank Act to the National Assembly by June 30th 2018 is a major structural benchmark under the said SMP.
This portion is talking about conditionality. We are not conditioned, and nobody can impose conditionality for us to make law. If that is the reason why it comes as a state of urgency, then we are not really being treated the way we should be treated.
We are considering the Bill on the basis of the national interest, not on the dictates of any other authority on the face of the earth. So Honorable Speaker, I will take my seat after emphasizing that there is a need to put our financial institution on the right path. We know what the central bank is mandated to do. Under Section 149 of the constitution, no taxation without law providing for it, under section 150 every money collected from the government should be deposited into the consolidated fund maintained by the sole banker of the government, The Central Bank. Under Section 151, no money can be withdrawn without law. So if you have proper regulation honorable speaker, it means that the monies puts in and withdrawn from the consolidated fund under the control and direction of the central bank would be there on the basis of law and removed on the basis of law and the record would be there. That is what we are told that this bill seeks to do and there is no doubt that its time has come for that to be done. We must also add that the banking system will not be able to flourish if they no longer depend on giving loans to government unless they are capable of investing in the productive base of the economy. If not then they will collapse. There is the need to look into the macroeconomic realities of the bank and the prospect of build a stock exchange for the country. There is money flooding everywhere, but people don’t know where to put them,. Something needs to be done to capture all that money and put it in investment portfolio that will ensure the development of the productive base and the general development of the country.
Thank you very much…………