|
|
|
| July 1, 2005 | Friday | Jumadi-ul-Awwal 23, 1426 |
Law being drafted for new GP fund
LAHORE, June 30: The Punjab government is drafting a law for governing the operations of the two newly-established funds — General Provident Fund and Pension Fund — outside the budget. The funds have already been notified by the government and the draft law is expected to be finalized this month for presentation before the provincial assembly for seeking its approval.
“The two funds will come into existence from today — the first day of the new fiscal year,” say officials.
The government has capitalized its debt accumulated on account of GP fund and pensions’ repayment for “profitably managing” the ever-increasing liability.
The two accounts have been capitalized by the government under the $500-million Punjab Resource Management Programme (PRMP). The programme is being funded by the Asian Development Bank for five years.
“The funds have been established outside the provincial budget in order to offload the burden on the provincial exchequer,” says an official. The government would continue to put all its GP fund receipts into the new fund for some seven years after which it is expected to become self-sustaining, allowing the government to make all payments on this account to its employees from it.
In the fiscal 2005-06, the government has set aside Rs8 billion to put in the GP fund.
Similarly, the officials say, the government will put “surplus money in the pension fund and make profits through its investment in different areas.”
The fund will be managed by professional financial experts, who will be empowered under the law to take decisions for profitable investment of the fund.
The funds have been created as part of the Punjab government’s Debt Management Strategy, devised to reduce the province’s high cost debt burden that was eating into whatever meagre financial resources were available to it for priority areas of infrastructure and social sector.
Actually, the officials have long been insisting that the high cost of debt servicing incurred by the province was squeezing the fiscal space for development with every passing year.
It was feared that if the expensive debt was not taken care of and replaced with cheaper loans forthwith, the province would not be able to fund its development requirements in the years to come and end up paying a major chunk of its resources in servicing its debt.
The provincial government began to execute its debt management strategy by obtaining low-cost loans from the ADB and the World Bank for using them to retire expensive federal debt.
A cash-strapped Punjab had accumulated high cost federal debt in the form of Cash Development Loans (CDLs) during the 1980s and 1990s for financing development.
While the Punjab has been bringing down its expensive federal debt for creating greater fiscal space for enhancing its future development outlay, its debt on account of the GP fund accumulation has been on the rise.
In addition to the interest payments on the GP fund liability, the provincial finance department felt that payments (Rs3.953 billion in 2003-04 and Rs4.661 billion in 2004-05) made from it have already overtaken receipts (Rs3.825 billion in 2003-04 and Rs4.312 billion in 2004-05).
Disbursements from the GP fund in 2009-10 are estimated to be Rs10.616 billion as against receipts of Rs7.851 billion into it.
The situation spawned fears that the provincial government may eventually have to pay the liability from its “own resources” in the years to come.
The task force, with former federal minister for privatization Altaf Saleem as its chairman, set up by the government to suggest GP fund and pension reforms in 2003-04, had stressed that after 2016 the government would need to put additional resource of Rs65 billion into the GP fund if it was not capitalized.
|
|
|
|
