ISLAMABAD: The federal government has ordered all ministries, divisions, the four provinces, Azad Kashmir and Gilgit-Baltistan to immediately surrender their working capital and surplus funds kept for investment, and deposit the money into the single treasury account of the federation.
The decision will apply to all public sector enterprises as well.
Through a memorandum, the Ministry of Finance has conveyed to the registrars of the Supreme Court and all the high courts, the Senate, the National Assembly and the controllers of accounts of all military organisations that all notifications since July 2003 enabling such entities to keep surplus funds and working capital in their own accounts “are hereby withdrawn with immediate effect”.
“Further, the approval accorded to public sector entities with respect to maintain working balance are also hereby withdrawn (sic),” said the notification.
Finance ministry rescinds decision allowing entities to keep working capital in ‘own accounts’
Finance Minister Miftah Ismail has repeatedly said over the past month the budget deficit for the current fiscal year was estimated at Rs5.6trillion and set to reach Rs6.4trillion by end of the fiscal year after taking into account the fuel and electricity subsidies.
He has also blamed the PTI government on record for not allocating funds for these ‘unrealistic’ subsidies.
The country’s economic team, led by Mr Ismail, is currently in Doha, Qatar, to negotiate the revival of the IMF programme derailed at the last moment because of introduction of large fuel and electricity subsidy schemes by then prime minister Imran Khan on Feb 28.
The finance ministry’s order explained that Article 78 of the Constitution stipulated all funds received by or on behalf of the federal government are deposited either as part of the Federal Consolidated Fund (FCF) or Public Account of the Federation (PAF).
The cash balances of both FCF and PAF are maintained under central account No.1 (non-food) at the State Bank of Pakistan while Article 79 requires the custody and the payment of moneys from and to the central account be regulated by an act of parliament.
The finance ministry reminded all concerned that parliament had promulgated the Public Finance Management Act (PFMA) in 2019. It now governs all the matters of FCF and PAF and requires the operations of the FCF and PAF to vest in the finance division under the overall supervision of the federal government.
Furthermore, section 23(2) of the act also “requires that no authority shall transfer public moneys for investment or deposit from the government account, including the Assignment Accounts, to any other bank account without prior approval of the federal government”.
On top of that, section 45 of the act “provides overriding effect over all other laws and any law inconsistent with this act” while rule 4(4) of Cash Management and Treasury Single Account Rules 2020 stipulate that no authority shall transfer public monies in contravention of sub-section (2) of section 23.
Under various notifications, the working balances and investment of surplus funds belonging to PSEs and local and autonomous bodies were permissible to be deposited with any public or private bank for their operations subject to a set of conditions and criteria.
Published in Dawn,May 24th, 2022