By Abdul Wajid Khan ISLAMABAD, May 26, (INP-WealthPK): The National Assembly of Pakistan has passed the Fiscal Responsibility and Debt Limitation (Amendment) Bill, 2022 to reduce the federal government’s fiscal deficit and the ratio of public debt by effective management. According to the statement of objects and reasons of the bill, a copy of which is available with WealthPK, the piece of legislation is meant to keep the limit of the stock of government at 10% of GDP. The enforcement of the bill will institutionalise debt management functions in a single office that will report to the finance secretary while assigning additional functions to the Debt Office and creating two additional senior management positions in it. According to the Finance Ministry, the amended bill would strengthen the Debt Office as it would get the mandate and resources for effective planning and execution of debt management functions of the government. The bill will pave the way for setting up a Debt Management Office (DMO) in the Finance Ministry for effective planning and looking into debt-related affairs. The brief on the bill said that amendments to the Fiscal Responsibility and Debt Limitation Act were required to strengthen Debt Policy Coordination Office (DPCO) and transform it into DMO with mandate and resources for effective planning and execution of debt management functions. “Within 60 days of passage of the bill, the federal government shall establish an office to be known as DMO, consisting of four executives including a director-general, who shall report to the finance secretary,” says the piece of legislation. According to the bill, the Finance Division will prepare a medium-term national fiscal framework, covering aggregate fiscal projections, especially revenue, expenditure and primary balance of the upcoming fiscal year and the two outer years, which will be presented to the National Finance Commission (NFC) monitoring committee. It will also be published in the budget strategy paper and annual budget statement. In the amended bill, the ceiling on the stock of total public debt has been proposed at 60 % of GDP while the ceiling on the stock of outstanding guarantees has been proposed to be 10% of GDP. Also, the ceiling on new guarantees issued during a fiscal year has been proposed to be 2% while the ceiling on the stock of total public debt and guarantees has been proposed to be 70% of GDP. Under the bill, additional responsibilities have been assigned to DMO including the preparation of a medium-term debt management strategy in line with the medium-term budgetary framework (MTBF) and maintenance of record of public debt and guarantees with the help of State Bank of Pakistan (SBP), Central Directorate of National Savings (CDNS) and Ministry of Economic Affairs. The DMO will prepare an annual borrowing plan, raise domestic debt through government securities, devise and implement a mechanism for raising domestic debt, formulate guidelines for CDNS and other agencies and raise external debt through commercial sources. It will also coordinate with external finance wing to raise debt for the balance of payment support and cooperate with the Ministry of External Affairs in raising external debt and preparing policy guidelines to raise external debt. Other functions of the DMO include preparation of debt bulletin, monitoring of guarantees, evaluation of requests for government guarantees, acting as custodian of guaranties and as investor relations office of the Finance Division in matters pertaining to public debt. According to the latest data of SBP, Pakistan’s total debt and liabilities have reached around Rs53.54 trillion, accounting for 85.7 % of GDP. The SBP data also showed total gross public debt at Rs44.3 trillion. According to the data available with WealthPK, the current state of public debt is higher than its desired limit as the government has proposed in the bill that total debt and liabilities should not be higher than 70 % of GDP.