What is the meaning and implication of this move to BOT?
Before the privatization of NBC [National Bank of Commerce], all government entities banked there. That is because it was the government's main bank. But after the privatization of NBC, it became a free-for-all kinda situation.
This move is long overdue. The government doesn't need to bail out any of those private banks should they take risky moves in the name of safeguarding NSSF [National Social Security Fund] or the Dar es Salaam local government's coffers.
In fact, we are poised now to see BoT opening up its branches in every region of the country. That move should strengthen our fiscal and monetary policies. I'm looking forward to seeing the Karagwe municipality using its borrowing capacity from BoT to start offering its community better services. This is the true meaning of a decentralized economy.
It's time to run our economy the right way.
Back in the days, this is what BOT used to do.
I recall Mr. Nkurlu was head of domestic banking which had Currency, Bank Supervision and Government accounts.
It was centralized and easy audit and tracking how every penny flowed and flawed!
I am I support of this as Seppy mentioned!
The Treasurer Registrar is exercising his role as custodian of government assets. It is important that state-owned institutions which are not in the productive sectors are brought into prudent control in so far as the revenues they collect are concerned. You have government agencies that are by and large collectors of non-tax revenue on behalf of the Exchequer. Yes, they play a service role, as Sumatra, Fair Commission, EWURA etc do. But the revenues they collect sometime go into expenditures that are not necessarily prudent. By opening revenue accounts with the BOT it is possible to instill, I hope, a sense of financial discipline in them. Question is whether these institutions shall earn any interest from BOT? What rates?
You also have Social Security Funds which are also largely collectors of members' (employee) contributions. My argument has always been that even though the laws establishing these Funds provides that the Government guarantees honouring full contributions of members where the Funds go belly up, it is wrong to deem these institutions as parastatals per excellence. They should not be subjected to the same rigour of control as those institutions wherein the government has injected equity. If these Funds will also be required to bank with the BOT, they may lack the wherewithal to strike funding consortiums that enable them to leverage their funds for big investments and good returns that result in better returns for the members.
One of the injurious 'unintended' consequence of the Treasury Registrar's direction will be the adverse impacts on NMB and other commercial banks such as CRDB and Bank M that enjoy huge deposits from several parastatals. Some of these banks are listed on the DSM Stock Exchange and may experience a downward spiral in the value of their shares following possible declining profit performances.
The large question for me is whether the decision that has been taken was tested through a number of considerations top most being how the government will benefit from the decision and second whether the consequences of the decision, in terms of its impact on and in the economy, and thus in tax revenues and jobs, was given serious consideration.
These are quick initial ideas and reactions.
Looking at the big picture, TR is right, both in law and in sheer financial management. Inaingia akilini.
However, going to niceties of good corporate governance, BoT will have to pay interest on call account rates. This is because BoT will be trading on the funds or using them to gauge their capital adequacy: for all intents and purposes the domestic banking directorate of BoT is a commercial bank like any other.
Secondly, there may have to be a GN of some kind. When I headed finance in TANESCO, we were responsible only to the Board. Only the Minister (of Energy) could give directions "of a specific nature or a general nature" to the Board. This is the situation in most of the "old" parstatals that I know of.
Though there was a TR representative on the Board, it's a pity the letter does not cite the explicit section of the law that gives TR these powers. A crafty CAG could hit you with an audit query if, for instance, BoT mismanaged those funds (EPA? ESCROW?).
Ningekuwa bado niko kazini TANESCO nisingetekeleza unless walau nipate Board Resolution, ingawa katika enzi hizi za majipu utahitaji usiwe na majipu ili uwe na msimamo wako kitaaluma kwi.