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July 12, 2020

Finance ministry proposes key changes for debt policy office

National

July 12, 2020

ISLAMABAD: Amid sky rocketing debt burden, Ministry of Finance has proposed over two dozen key changes into Fiscal Responsibility and Debt Limitation Act 2005 for strengthening the Debt Policy Coordination Office (DPCO) working under supervision of secretary finance, The News has learnt.

The government proposed to cut powers of External Finance Wing of Ministry of Finance by granting powers of taking decision on foreign commercial borrowing/launching of international bonds, Sukuk to strengthen the role of Debt Office after incorporating these changes in law with the approval of Parliament. However, Ministry of Finance’s External Wing and Economic Affairs Division (EAD) will continue playing their leading role for getting foreign loans from multilateral creditors such as IMF, World Bank, Asian Development Bank and AIIB etc. The Debt Office will also monitor Central Directorate of National Savings (CDNS) and any other agency engaged in domestic borrowing. The Debt Office will act as custodian of all guarantees issued by the federal government. The debt to GDP ratio, according to the official, will be defined as public debt to GDP ratio so liabilities of all kinds will be excluded from it. The DPCO will also introduce new debt instruments.

“Yes we have forwarded draft of 16 key changes into FRDLA 2005 (Fiscal Responsibility and Debt Limitation Act) to Ministry of Law for vetting and after preparation of draft legislation it will be submitted before the Parliament anytime soon,” top official sources confirmed to The News here on Saturday.

The additional functions to DPCO have already been notified through in April 27, and now they would be incorporated into proposed amendments into FRDLA 2005. For the post of Director General DPCO, the Finance Ministry proposed Special Pay Scale (SPS)-II and for three Directors they proposed MP-1 scales who will be hired through competitive process.

The proposed 16 changes include preparation of medium term debt management strategy in consultation with the relevant stakeholders and finalized with prior approval of Minister of Finance in line with Medium Term Budgetary Framework (MTBF); (b) Preparation of Annual Debt Review in line with long term priorities of the federal government with approval of Secretary Finance and published within three months of the close of financial year; (c) preparation and finalisation of annual borrowing plan with prior approval of federal government.It shall be published along with the budget documents; (d) raising of domestic debt through domestic government securities, bank loans of any other domestic borrowing instruments other than those issued by Central Directorate of National Savings (CDNS); (e) formulating and implementing a process for raising domestic debt through public auctions of domestic government securities with prior approval of Secretary Finance; (f) preparation of guidelines with approval of Secretary Finance and monitoring of CDNS or any other government agency engaged in domestic borrowing; (g) raising external debt through commercial borrowing including securities such as bonds/sukuks, bank loans or any other commercial borrowing instruments; (h) coordinating with External Finance Wing to record and analyse any debt raised for balance of payments cover or through the IMF; (i) setting annual and medium term targets for the Economic Affairs Division (EAD) in raising of external debt; (j) proposing policy guidelines to Finance Division and EAD regarding raising of external debt; (k) preparation of a comprehensive debt bulletin finalized with approval of Secretary Finance and its publication; (l) preparation and implementation of process for government guarantees including the guarantees relating to Public Private Partnership (PPP) with approval of federal government; (m) advising the Finance Division in evaluation of requests for government guarantees made by the State Owned Enterprises.