ISLAMABAD: The National Assembly on Friday passed the Fiscal Responsibility and Debt Limitation (FRDL) (Amendment) Bill, 2022, with a majority vote after reaching an understanding with a small group of opposition members.

The bill, which was not in the original agenda, was presented for its passage by Minister of State for Finance Aisha Ghaus Pasha through a supplementary agenda amid protest by members of the Grand Democratic Alliance (GDA).

The amendment bill will strengthen the Debt Office with the mandate and resources for effective planning and execution of debt management functions of the government.

The bill, according to the Statement of Objects and Reasons, provides for reduction of federal fiscal deficit and ratio of public debt to gross domestic product to a prudent level by effective public debt management.

The law will strengthen debt office with mandate and resources for loan management functions

The bill generally seeks to achieve three key objectives: limit the stock of government guarantees at 10pc of GDP; publish a Medium-Term National Macro-Fiscal Framework (MTMFF); and institutionalise debt management functions in a single office reporting to the finance secretary instead of the finance minister.

The bill had been tabled in the National Assembly by the then finance minister, Shaukat Tarin, in May last year and it had been approved by the standing committee in its meeting held on February 16 in line with international commitments.

A senior official of the Ministry of Finance while briefing the committee members had stated that the FRDLA, 2005, provided for the reduction of federal fiscal deficit and ratio of public debt to GDP to a prudent level by effective public debt management. The Debt Policy Coordination Office was also established under this act.

The amendment bill, he had stated, would strengthen the Debt Office with the mandate and resources for effective planning and execution of debt management functions of the government.

The committee was told that the government guarantees stood at six per cent of the GDP and the total stock of the public debt at 72pc of GDP at that time. The bill sought to increase the limit on the stock of outstanding guarantees to 10pc of GDP.

Likewise, the limit on the stock of the total public debt and guarantees was proposed at 70pc of the GDP in the bill.

The official had informed that the bill proposed to bring overall debt to GDP ratio to 60pc in six years after the fiscal year 2020-21 as it envisaged the target to decrease debt to GDP ratio by 2pc annually and outstanding guarantees to 10pc of GDP. It was explained that the law also provided room for loans in case of an increase in expenditure so that the system can continue to function.

Published in Dawn, May 21st, 2022