ISLAMABAD, July 11: The government here on Thursday circulated draft of the “Fiscal Responsibility and Debt Limitation Law” which seeks to eliminate revenue deficit to “nil” not later than June 30, 2007, and thereafter maintaining a surplus.

It also calls for minimizing the public debt to 60 per cent of the estimated Gross Domestic Product (GST) by June 30, 2012, and to reduce the total public debt by not less than 2.5 per cent of the GDP in every financial year, provided that the social and poverty related expenditures are not reduced below 4 per cent of the GDP.

The law proposed to limit the government to make borrowing only for the purpose of development expenditures and meet all its current expenditures from revenue receipts.

The draft law also said that the government will not issue new guarantees, including those on rupee lending, bonds, rate of return, output purchase agreements and all other claims and commitment that may be prescribed from time to time for any amount exceeding 2 per cent of the GDP.

“The government can depart from these principles on grounds of unforeseen demand on the finances of the government due to national security or natural calamity which are required to be determined by the national assembly”, the draft law said.

The federal government shall, to maintain transparency in its performance, lay before the national assembly in each financial year the following five economic policy statements:

The Medium Term Budgetary Statement included in the Annual Budget Statement (ABS);

The Annual Fiscal Policy Statement included in the ABS;

The Mid year Economic Report by the end of February; and the Annual Statement of the Economy Report by the end of June.

The Economic Policy Statements shall incorporate to the fullest extent possible all government decisions which have a material effect on the economic situation of the country, except those that have been excluded for specified reasons by the Finance Minister.

A Debt Policy Coordination Office (DPCO) is proposed be established to serve as a Secretariat to achieve the objectives of this law. The office shall prepare a 10-year debt reduction path which will be followed by the government and against which the performance of government will be monitored and analyzed by the DPCO. The DPCO shall submit its annual reports to the cabinet after the approval of the Finance Minister.

All the stakeholders are requested to forward their comments on the draft to Dr Tariq Hassan, Advisor to the Finance Minister by July 15, 2002.