Stock guarantees reduced to 10% of GDP

The IMF, World Bank, and ADB have highlighted the need for consolidated debt management functions within the Finance Division

Aftab Ahmed

The government has decided to amend the Fiscal Responsibility and Debt Limitation (FRDL) Act 2005 to limit the stock of government guarantees at 10 percent of GDP in order to fulfill the demand of the International Monetary Fund (IMF).

Under the amendment, the government will also publish Medium-Term National Macro-Fiscal Framework and institutionalize debt management functions in a single office report to the Finance Secretary.

The government will also create two additional senior management positions within DPCO.

Sound practice for public debt management necessitates that liabilities should not be fragmented as it leads to insufficient coordination of various institutions involved, suboptimal borrowing choices, duplication, and a disconnect with strategy implementation.

In Pakistan, the growing realization of the effectiveness of debt management function by consolidating debt management functions and adequately resources managed and adequately resourced Debt Management Office.

The Debt Policy Coordination Office (DPCO) was established for the Fiscal Responsibility and Debt Limitation (FRDL) Act 2005.

The proposed amendments are in line with the practices around the world.  The IMF, World Bank, and ADB had also highlighted the need for consolidated debt management functions within the Finance Division. The law division has vetted the draft Bill proposing the aforementioned amendments in the Responsibility and Debt Limitation Act.