ISLAMABAD, Aug 3: Revising the accounting procedure for financing by donors through loans and grants, the ministry of finance has informed all ministries and provincial governments that a revolving fund account be opened with the National Bank of Pakistan, separately from the account for government’s share of project financing (counterpart funds).
In a memorandum to all federal ministries, provincial departments of finance, planning and development, AGPR and State Bank, the finance minister stated that the NBP will be the designated bank for handling all transactions of revolving fund accounts.
The foreign currency amounts received under a foreign credit, loan or grant for the revolving fund would be converted into rupees at the SBP’s weighted average buying rate of exchange prevailing on the date of transfer of funds by the donors.The revolving fund account would be lapsable at the end of each fiscal year. However, the lapsed balance in one fiscal would be protected through budgetary allocation in the next fiscal.
The payments out of the revolving fund accounts by way of reimbursement to NBP would be translated normally at the State Bank rate of exchange at which the foreign currency was purchased by the State Bank.
The revolving fund accounts at NBP branches should show debits, credits and balance in rupees as the funds available to the project management would be in rupees.The rate of exchange used for donor reporting purposes by the project authorities would be the rate of exchange applied by State Bank for converting foreign currency into rupees for that tranche at the time of receipt of funds in the State Bank from the donor.
In case of more than one tranches, the rate applied for each tranche will be used for donor reporting purposes and fund received in the first tranche will be utilised first and the unutilised balance should be attributed to the last tranche.
Separate revolving fund accounts should be established by the project management at the NBP for each of the loans, credits or grants, and each revolving fund account will be designated a special sub-fund identification number upon establishment of the account.
Each project should prepare its own annual financial statements comprising expenditure from revolving fund account and direct payments.
The commitment or an obligation to make a future payment, funds for which are allocated in the budget, should be recorded against the funds authorised from assignment account in accordance with laid criteria.
The commitment should be recorded when amount of involved expenditure is above Rs0.5 million or 10 per cent of total budget head, whichever is higher.
The commitment would only be raised for those expenditures expected to be paid in the current fiscal year. Commitments which are not renewed would be cancelled.
The project authority would close the revolving fund assignment account with NBP and surrender unspent rupee balance to the government within two weeks of the close of a project.
After receipt of intimation from State Bank, Economic Affairs Division (EAD) will reconcile unspent balances with concerned donors within one week, and the finance division will provide necessary funds in the block allocation of EAD for refund of loan through normal budgetary process.