ISLAMABAD: The government is working to establish Debt Management Office (DMO) in the Ministry of Finance for effective planning and execution of related functions, WealthPK reported.
According to a brief of the Ministry of Finance on a bill titled Fiscal Responsibility and Debt Limitation (Amendment) Act, 2021, a copy of which is available with INP-WealthPK, in order to strengthen the Debt Policy Coordination Office (DPCO) and transform it into DMO with mandate and resources for effective planning and execution of debt management functions, amendment to the Fiscal Responsibility and Debt Limitation (FRDL) Act, 2005 is required.
The FRDL Act provides for the reduction of federal fiscal deficit and ratio of public debt to gross domestic product (GDP) to a prudent level by effec-tive public debt management.
The Finance Ministry brief states that the proposed amendments to the FRDL Act, 2005 are expected to assist the government to limit the stock of government guaranties at 10 percent of GDP (gross domestic product), publication of medium-term national macro-fiscal framework, and to institutionalise debt management functions in a single office reporting to the finance secretary instead of the finance minister.
“Within 60 days of commencement of the FRDL (Amendment) Act 2021, the federal government shall establish an office to be known as DMO, consisting of four executives, including a director general, who shall report to the secretary finance,” reads the bill.
The National Assembly’s Standing Committee on Finance will consider the bill in its upcoming sessions and review it in detail before its clearance, WealthPK reported.
According to the bill, the Finance Division shall prepare medium-term na-tional fiscal framework, covering aggregate fiscal projections, especially revenue, expenditure and primary balance of the upcoming fiscal year and the two outer years in respect of the federal government, provincial gov-ernments and other areas of Pakistan, which shall be presented to the Na-tional Finance Commission (NFC) monitoring committee. It will also be published in budget strategy paper and annual budget statement.
Under the bill, ceiling on the stock of total public debt has been proposed to the 60 percent of the GDP, while ceiling on stock of outstanding guaran-tees has been proposed to be 10 percent of GDP.
Also, ceiling on new guarantees issued during a fiscal year has been proposed to be 2 percent of GDP, while ceiling on the stock of total public debt and guarantees has been proposed to be 70 percent of GDP.
It added that conditions for the departure from the intended fiscal and debt reduction paths have been made more generalised to allow for unforeseen circumstances as determined by the National Assembly. Previously, this departure was allowed for reasons of national security or calamity.
Under the bill, additional responsibilities have been assigned to DMO which include the preparation of medium-term debt management strategy in line with Medium Term Budgetary Framework (MTBF), maintenance of record of public debt and guarantees with the help of State Bank of Paki-stan (SBP), Central Directorate of National Savings (CDNS) and Ministry of Economic Affairs (MoEA).
The DMO will prepare annual borrowing plan, raise domestic debt through government securities, formulate and implement process for raising do-mestic debt, formulate guidelines for CDNS and other agencies and raise external debt through commercial sources.
It will also coordinate with external finance wing for debt raise for balance of payment support, coordinate with the Ministry of External Affairs in raising external debt and prepare policy guidelines to raise external debt. -INP
