After striking an agreement with a tiny group of opposition MPs, the National Assembly enacted the Fiscal Responsibility and Debt Limitation (Amendment) Bill, 2022, with a majority vote on Friday.
Minister of State for Finance Aisha Ghaus Pasha offered the law for passing through a supplementary agenda, which was not on the initial agenda, despite protests from members of the Grand Democratic Alliance (GDA).
The amendment bill will give the Debt Office the authority and resources it needs to plan and execute the government’s debt management tasks effectively.
According to the bill’s Statement of Objects and Reasons, the federal budget deficit and the public debt-to-GDP ratio will be reduced to a sensible level by the end of the year.
The bill’s main goals are to cap the stock of government guarantees at 10% of GDP, publish a Medium-Term National Macro-Fiscal Framework (MTMFF), and consolidate debt management activities under a single body reporting to the finance secretary rather than the finance minister.
The measure was introduced in the National Assembly in May of last year by then-finance minister Shaukat Tarin, and it was adopted by the standing committee on February 16 in accordance with international commitments.
While briefing the committee members, a senior official from the Ministry of Finance stated that the FRDLA, 2005, provided for the reduction of the federal fiscal deficit and the ratio of public debt to GDP to a reasonable level through effective public debt management. This act also established the Debt Policy Coordination Office.
According to him, the amendment bill will give the Debt Office the mandate and resources it needs to plan and execute the government’s debt management functions effectively.
According to the committee, government guarantees were 6% of GDP at the time, and the overall stock of public debt was 72 percent of GDP. The bill attempted to raise the ceiling on the outstanding stock.
Similarly, the measure proposes a maximum of 70% of GDP on the stock of total public debt and guarantees.
According to the official, the measure aimed to reduce the overall debt to GDP ratio to 60% in six years after the fiscal year 2020-21, with a goal of reducing the debt to GDP ratio by 2% yearly and outstanding guarantees to 10% of GDP. The statute also allowed for loans in the event of a spike in expenditures, allowing the system to continue to function.
