Regulation and revival of economy

July 03, 2022

The parliament should work on passing a Revival of the Economy Act based on a political consensus

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he 1973 Constitution of Pakistan envisages in its Article 78 that “all revenues received by the federal government, all loans raised by that government and all the monies received by it in repayment of any loan, shall form part of a consolidated fund, to be known as the Federal Consolidated Fund. All other monies received by or on behalf of the Federal Government; or received by or deposited with the Supreme Court or any other court established under the authority of the Federation; shall be credited to the Public Account of the Federation”.

Article 79 provides for the regulation of the consolidated fund and public accounts through an act of parliament. “The custody of the Federal Consolidated Fund, the payment or monies into that fund, the withdrawal of monies there from, the custody of other monies received by or on behalf of the federal government, their payment into, and withdrawal from, the Public Account of the Federation, and all matters connected with or ancillary to the matters aforesaid shall be regulated by Act of [Majlis-i-Shoora (Parliament)] or, until provision in that behalf is so made, by rules made by the President”.

Similarly, Article 119 requires the provinces to make laws for regulation of the monies. “The custody of the Provincial Consolidated Fund, the payment of moneys into that fund, the withdrawal of monies there from, the custody of other monies received by or on behalf of the provincial government, their payment into, and withdrawal from the Public Account of the Province, and all matters connected with or ancillary to the matters aforesaid, shall be regulated by Act of the Provincial Assembly or, until provision in that behalf is so made, by rules made by the Governor”. The proposed Act for Regulation of Provincial Consolidated Fund and Public Account has yet to see the light of the day.

The provinces get their shares of funds from the federal divisible pool after the approval of the annual budget. The government of the Punjab adopted the Punjab Delegation of Financial Powers Rules on July 1, 2016, after these were approved by the then governor.

The preface to its 10th edition says, “Delegation of Financial Powers Rules provide a regulatory framework for the management of expenditure by the Provincial Government Officers. Previously, Punjab Delegation of Financial Powers Rules, 2006 were in vogue. However, with the passage of time, the extent of powers delegated to the administrative departments and their subordinate offices have rendered inadequate. The Finance Department carried out an exercise to revise and update these financial powers, especially, the financial powers for issuance of administrative approvals, technical sanction estimates and powers of Departmental Development Sub-Committee (DDSC) for approval of development schemes. It is pertinent to mention that the instant revision signifies a marked departure from the previous Delegation of Financial Powers as the revision draws force from a detailed analysis of lacunae in the Delegation of Financial Powers Rules, 2006. This revision will improve financial discipline and remove inherent weaknesses in the framework of financial regulations. Furthermore, amendments in related Financial Rules have also been considered and incorporated in the revised book to make it compatible”.

The time has come to bring the financial rules to the parliament at the federal level and the Punjab Delegation of Powers Rules 2016 to the Provincial Assembly for wider discussion and legislation to fulfil the constitutional requirement of Article 119.

The General Financial Rules are very elaborative in Volumes I and II expressing the financial powers of the disbursing officers, administrative and technical approvals, sanction of payment and strict control over the expenditures.

Now the time has come to bring such financial rules to the parliament at the federal level and the Punjab Delegation of Powers Rules 2016 to the Provincial Assembly for wider discussion and legislation to fulfil the constitutional requirement of Article 119 for better regulation of the Provincial Consolidated Fund (PCF) and the Public Account. This will provide another opportunity at the political and parliamentary level to overcome any flaws and weaknesses in the financial framework.

The financial rules are meant to empower the government officers to exercise the spending limits and laying out the procedures to account for the disbursements. At times too strict a regulation of the flow of money results in under-utilisation of funds. Billions of rupees thus remain un-utilised out of the annual development programmes.

In devising the suggested Act, we should benefit from the best practices in the developed nations. In the United States of America, for example, a debt ceiling is authorised by the Congress. The opposition almost always insists on equal expenditure cuts across government departments whenever the debt ceiling is reached.

The parliament should now work on passing a Revival of the Economy Act based on a political consensus. The timeframe for stabilising the economy should be at least 20 years. The time has come to agree on a national debt ceiling. The parliament should revise it after exhaustive debates in view of the need, utility and outcome or further borrowing. Having a suitable debt ceiling and respecting it will help the future governments avoid the risk of sovereign default.

The country’s tax to GDP ratio is less than peer nations in the region.

“Pakistan’s tax to GDP ratio has been estimated at 10.8 percent for the fiscal year 2021-22 as against a ratio of 8.5 percent in the preceding fiscal year,” according to the Economic Survey of Pakistan 2021-22. The tax to GDP ratio of Turkey, by comparison, is 23 percent.

We also need to decide what to import and achieve the right balance between imports and exports. Currently the imports of goods and services as a percentage of the GDP stand at 20.32 percent while the exports are 10.12 percent of the GDP.

During the fiscal year 2021, the country’s exports were about $25.304 billion and imports $56.380 billion. Setting up import substitution industries can create employment and spur the economy.


The writer is a senior research officer at the Provincial Assembly of the Punjab. He can be reached at muhabbatranagmail.com



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