The National Assembly Standing Committee on Finance has postponed making the amendments proposed to the Fiscal Responsibility & Debt Limitation Act, 2021 for an increase in the public debt limit from 60 to 70 percent of GDP [Gross Domestic Product], including the government sovereign guarantees into the public debt and liabilities.
The actual size of government debt and liabilities stands at 62 percent of GDP, which includes two percent of the sovereign guarantees.
As the opposition members alleged that the amendments were being made due to pressure from the International Monetary Fund (IMF), the NA panel meeting held with Faizullah Kamoka in the chair at the Parliament House on Monday deferred the amendments.
Briefing the committee, the Finance Ministry officials said the level of the government guarantee on loans to state-owned enterprises was six percent of GDP, while with the new legislation guarantees, it would be possible to increase it up to two percent per annum. They said the new law proposed setting a maximum limit of 10 percent of government guarantees. According to Finance Ministry officials, the total volume of loans and guarantees would not exceed 70 percent.
According to the law, they said, the debt-to-GDP ratio was set at 60 percent, but previous governments had been violating it. At present, the government debt in terms of GDP is about 72 percent, they informed. They said that significant improvements in debt management were expected through the proposed amendment bill, and Debit Policy Office had been renamed as Debt Management Office in the proposed bill.
The committee deferred the approval of amendments for further consideration on them.
The NA panel also reviewed the Government Companies Governance and Operations Bill, 2021. In its briefing, the Finance Ministry officials said that state-owned companies incurred a loss of Rs. 145 billion in 2018-19. Most of the losses, they said, were incurred by power distribution companies, Pakistan International Airlines, Steel Mills, and National Highways Authority, while Oil & Gas Development Company Limited and Pakistan Petroleum Limited made higher profits. The central monitoring system would only check the performance of state-owned companies, which would set their targets in consultation with the relevant ministry, they said.
A committee member, Hina Rabbani Khar said the Ministry of Finance was making claims of having independent boards, though this was not the case. She added that in the past also independent boards were formed but they were never implemented.
The opposition members were of the view that the government-owned companies were so numerous that the Ministry of Finance could not monitor them on its own.
The officials responded that there were 200 companies run by 20 ministries. They said the Ministry of Finance had been conducting the audit of these companies for six years. In order to reduce the losses of state-owned companies, it is necessary to improve their performance, they stressed. There is no system to monitor the loss-making companies, according to the authorities.
Secretary Finance Kamran Afzal said that the boards of these companies would be completely independent and the Finance Ministry would have no role in running these companies.
Nafisa Shah, another member of the committee, said the list also included a virtual university and an endowment fund for liver disease. She asked what the Finance Ministry had to do with them. The government, she said, had also merged public service organizations with companies, adding that this would further undermine the performance of institutions working in the social sector.
Syed Naveed Qamar said the government had failed to reduce the circular debt. He said that the board also rubber-stamped the Finance Ministry orders. He opined that even the new method would not improve the system.
The Finance Ministry officials said the law would not apply to any trust funds or education and health institutions. They said the government could exempt any company from the PPRA [Public Procurement Regulatory Authority] rules but the new law did not contradict the Companies Act in any way. To this, the opposition members opposed the amendment and demanded the government to rethink it. The Ministry of Finance officials assured the committee that they would come up with new amendments. The bill was deferred for the next meeting.
Source: Pro Pakistani