Creative financing

 

Resignations due to bad management of enterprises in the public sector has yet to take root.  For instance, the 2 government-appointed directors in Bank of Valletta hang on until the forthcoming general elections when in fact they should have resigned ( or been dismissed ) in the wake of the MMProperty Fund fiasco and others.  Likewise, with the chairman of MFSA , whose interpretation of 'imminently', inter alia, takes shape in terms of several months instead of days.

 

Politicians in power everywhere have always been known to practise vigorous 'massage-parlour' techniques in their pronouncements on statistical publications. ( Disraeli's linking statistics with 'damn lies' suddenly springs to mind ).  Suchlike techniques were eventually extended to national accounting in a protracted endeavour to paint a brighter and more positive picture of  financing strategies than were truthfully the prevailing situations.

 

Just witness the latest technique resorted to by our own Minister of Finance, requiring those who hitherto had been used to drawing their VAT-line at end-January to bring it forward to end-December, thus permitting him to rob 2012 Peter to pay 2011 Paul and, in so doing , convincing the E U Commission that last year's budget deficit was in line with his projected calculations, then uncontested.

 

'Creative accounting' is generally legal, unlike 'cooking the books' as the Greek government was accused of doing 2 years ago, and still not denied until now.  Nevertheless, it remains unorthodox and certainly shorn of the transparency expected from politicians democratically elected and who ought to be perceived by their citizens to be whiter and purer than Caesar's wife.  Not surprisingly, it is often nicknamed ' financial engineering '  -  not complimentary, surely.

 

'Creative financing' has followed 'creative accounting' but, unusually for Malta, it hasn't taken all that long, as is wont in other matters, especially social.  Was it because for several years we have had an accountant, rather than an economist, as the head of the Ministry of Finance and Economics ?

 

For those who, understandably, desire to know more about  'creative financing' , let me just point out that it tries to create an innovative capital structure in an enterprise by arranging extended loans, credits and repayment terms such that a high level of financial leverage is achieved, otherwise impossible. 

 

You want an example?  Nothing better than the financing of the Valletta Entrance project, where to date not a cent has been debited to the public purse even though it is already advanced faster than planned.  Its financing vehicle still awaits to be set-up after 2 years !