ISLAMABAD (June 27 2003) : The Federal Cabinet on Thursday approved much-needed “Fiscal Responsi-bility and Debt Limitation Ordinance 2003”, which provides for eliminating revenue deficit, reduction of public debt and maintaining social and poverty-related expenditures to 4 percent of the GDP.
The ordinance, which is expected to be vetted by the Law Ministry, will have to be approved by the Parliament within 120 days of its promulgation. It is seen as strict recipe for fiscal discipline, accountability and transparency in the government spending and borrowings.
The ordinance provides that the government will have to present in the Parliament every six months a number of documents like fiscal situation, position of internal and foreign debt and mid-year economic review for debate there.
Sources said that for a political government it was a self-imposed control regime on its expenditures and financial management.
Economic Adviser to the Ministry of Finance Professor Ashfaq Hassan Khan told Business Recorder that the law provided for elimination of revenue deficit by 2006-07 disallowing any borrowing for the consumption purposes from that date.
It also proposed that the public debt as percentage of the GDP would come down to 60 percent by 2011-12 as, at present, it was around 92 percent and two years back, when the government embarked on its strategy for debt reduction, it was over 110 percent.
It envisaged that the debt should be reduced at least by 2.5 percent of the GDP every year.
The government will also provide guarantee that the public sector borrowing would remain within 2-2.5 percent in a year and in case of transgression, the government would make a commitment to be back on course within a specified time with specified menus of remedial measures.
Another important feature is that the social sector and poverty-related spending should not be below 4 percent of the GDP.
In case of divergence from the targets, the government would have to do a lot of explaining.
Only in case of natural calamity or pressing demand of national security, the Parliament would accept any slippage. Even in that case, the finance minister will have to make a commitment to come on line within a certain period.
The sources said that a political government has imposed on itself several restrains unheard of before.
In the 90's fiscal indiscipline, lack of transparency and accountability were at their worst resulting in economic turmoil one after the other.