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August 16, 2018

Fate of unit to manage Rs125b provincial funds hangs in balance


August 16, 2018

PESHAWAR: The fate of the unit to manage Rs125 billion provincial funds in the Khyber Pakhtunkhwa Finance Department continued to hang in the balance as the bill drafted for the purpose could not be presented in the provincial legislature.

The provincial government has already hired a professional to manage the funds, which recently jumped to Rs125 billion. The funds kept growing over the last few years.

The position of the fund manager has earned criticism from some high-ranking retired government servants and the association of the pensioners who argued it was heavily paid. However, the manager has continued to put in order a system to manage the funds portfolio that has started paying dividends.

The Khyber Pakhtunkhwa System of (Employees Benefit, Investment, and other) Funds Administration (Syfa) Bill, 2018 has also been drafted to be presented in the provincial assembly to facilitate the establishment of a permanent Fund Management unit.

Secretary Finance Shakeel Qadir Khan told this scribe that things had fast changed in terms of funds management and investment and the government had to take radical steps for better utilisation of its funds.

He said fund management was more of a treasury function, which deals mainly with control of interest rate risk and the placement of funds in various profitable ventures for specific time periods.

He pointed out that the government regulates its funds and investment in a cautious manner to meet its financial obligation vis-à-vis payment to the pensioners, etc.

The government, the secretary finance explained, is custodian of the contributions made by the government itself and other subscribers in the shape of Pension Fund, General Provident Investment (GPI) Fund, and others such as Hydel Development Fund (HDF) and Retirement Benefit and Death Compensation (RBDC) Fund.

He said the Pension Fund had risen to Rs52 billion, the GPI is about Rs40 billion and the HDF around Rs24 billion. He added that the RBDC fund is estimated at Rs2 billion and is growing by Rs2 billion annually.

The official said the HDF was meant for spending on specific projects and the RBDC and GPI are employees’ contribution while Pension Fund is government contribution.

The growth in these funds over the last 10 years could hardly beat the inflation, he pointed out. “The government had to take drastic measures to manage the funds in a manner that could benefit the subscribers and lessen the burden on the government exchequer at the same time,” he added.

However, the growth in the funds in terms of investment over the last 10 years remained meagre, he added, saying “We have only carried out cash-management, not fund investment so far.”

“Perhaps this was the reason the decision was taken in 2016 to hire a professional manager to manage and invest these funds in an appropriate manner,” the finance secretary said. He added that with the hiring of the fund manager the visibility of funds, global investment trends and other money market-related instruments had increased.

It has also sped up the decision-making of the provincial economic managers through which about Rs400 million has been earned so far by making timely investment of the funds, Shakeel Qadir Khan explained.

However, he admitted that there existed opposition to the establishment of the fund management unit. He said if the unit was not set up then they would have to follow another fund management model as the Finance Department did not have the capacity to manage investment on the money markets or other forums.

He said the Finance Department would then follow models like that of NBP Fullerton Asset Management Limited (Nafa) if the Fund Management Unit could not be established.

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