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LAHORE, July 6: The president has approved establishment of a public debt office to “monitor and execute debt strategy for ensuring that the level, quality and quantity of public borrowing is based on sound economic principles.”
“The office, to be a part of the ministry of finance (MoF), is expected to be set up in a couple of months. It will be headed by a professional,” finance minister Shaukat Aziz told the reporters at a briefing here on Saturday.
The minister said the proposed fiscal responsibility law will “institutionalize the government efforts to define the limits and parameters of debt.” He said the future governments would have to seek parliamentary approval if they wish to borrow beyond “limits and parameters as defined in the law.”
Moreover, he insisted, the future governments would also have to report to the parliament at least once every six months should the debt strategy goes off the course.
He said the country will be out of debt trap in five years. He said the country’s debt level would be brought down well below 60 per cent of the GDP. However, reduction in domestic debt may take 10 years.
The minister said the approval of establishment of an “Actuary Office to look into the potential pension liability of government and recommend ways and means to reduce it had also been granted”. He said it would also come into existence in a couple of months.
Aziz said the government was all set to convert its Statistics Division into independent, transparent statistical authority.
INTEREST RATES: The minister said the “weighted average borrowing rates were down two per cent in the last 12 months.” He said the reduction in the profit rates of National Saving Schemes would be “helpful to the banks in bringing down their interest rates below 10 per cent to single digit.”
He said the NSS rates had been linked to the PIB rates and are subject to review every six months. He said the “NSS profit rates had come down by about 4-6 per cent last couple of years compared to about 8 per cent reduction in inflation rate that stood at 2.6 per cent at the end of the last fiscal.”
He said the reduction in the “profit rates on the NSS, a major source of financing deficit, will slash government’s cost of debt servicing and help the banks mobilize more deposits.”
He claimed that the economic reforms started by the government a couple of years ago as well as 9/11 had helped the economy stay on course despite the Indian military build-up on the borders.
The minister said the PSDP size could swell depending upon the hoped-for, yet-to-be received grants from the friendly countries. He said Rs20 billion could be diverted for social sector as well as poverty reduction programme. “On this very issue we’ve already reached an understanding with the donors,” he claimed, adding the government would not need another IMF programme after completion of the PRGF.
Aziz also elaborated on the government efforts for the revival of the economy and promote the Islamic banking in the country. He said the president will inaugurate the Al Meezan Bank, adding the commercial banks were being encouraged to establish their Islamic banking subsidiaries and introduce new Islamic products.
