ISLAMABAD: In violation of the Supreme Court’s judgment that bars legislation without the federal cabinet’s approval, the government has quietly amended the definition of public debt through the Finance Act 2017 that will immediately understate the debt by a whopping Rs2 trillion.
It is the second change in the definition of public debt during the last one year after the finance ministry has miserably failed to curtail the debt and is now applying ‘window-dressing tactics’ instead.
In June last year, the government had introduced sweeping changes to the Fiscal Responsibility and Debt Limitation (FRDL) Act of 2005 –the most significant among them being the change in the definition of total public debt.
According to a new clause introduced lately in the Finance Act that the National Assembly passed on Tuesday, “total debt of the government is public debt less accumulated deposits of the federal and provincial governments with the banking system”.
The single change would reduce the public debt by Rs2 trillion to Rs18.9 trillion as of March this year, although technically the debt remains on the government’s books.
Eminent lawyer and tax expert Dr Ikramul Haq has decided to challenge the latest amendment to the FRDL Act in the apex court.
“The new amendment to the FRDL Act is in violation of the Constitution and the Supreme Court’s August last year judgment,” said Dr Haq while talking to The Express Tribune.
He said the federal government action was nothing more than a window-dressing after the finance ministry had failed to control the ballooning debt.
The tax expert said the federal government could not take into account provincial deposits, which was also an unlawful act.
In a clever move, Senator Ayesha Raza Farooq of the PML-N had moved the amendment to the FRDL Act from the platform of the Senate Standing Committee on Finance during budget deliberations.
However, the law ministry representative, who was present during the committee meeting, had plainly told Senator Ayesha that any change in fiscal laws could not be introduced without the prior approval of the federal cabinet. He further stated that the amendment could not be introduced as private member legislation.
The Finance Bill 2017 that the federal cabinet approved on May 26 did not contain amendments to the FRDL Act. According to the Supreme Court’s judgment of August last year, the existing legal and regulatory procedures cannot be changed without the prior approval of the federal cabinet.
In the light of 18th Amendment, the Supreme Court defined the federal government as the federal cabinet including the prime minister. This binds the federal government to take every case to the federal cabinet for approval, although it is not strictly following the court verdict.
“Second, the FRDL Act had been passed by both the houses of parliament in 2005 and the act can only be amended by the National Assembly and the Senate through separate legislation,” said Dr Haq.
“In case of the Finance Bill, the Senate does not have the voting powers, therefore, every successive government tried to use this avenue to amend controversial laws,” he added.
The federal government has been contracting very expensive loans since it came to power four years ago. Under the original 2005 FRDL law, which was subsequently amended last year, public debt should not be more than 60% of the Gross Domestic Product.
Through an amendment in June last year, the government got changed this clause to “public debt to 60% of GDP by end of June 2019”, clearly moving the goalpost.
However, even the previous year’s FRDL amendment could not serve the real purpose to hide a deteriorating debt situation. Finance Minister Ishaq Dar has lately come up with the idea of “Gross versus Net” public debt definition.
Gross Public Debt as of March 2017 is still 65.5% of the GDP or Rs20.9 trillion. Dar has stopped quoting the figure in his speeches and instead citing net public debt, which is roughly Rs2 trillion less than the actual public debt. However, both these figures have been given in the Economic Survey of Pakistan 2016-17.
In order to give legal cover to his new terminology, Dar got the law amended again. “The Public Debt-to-GDP ratio was 60.2% of the GDP in June 2013 that has been brought down to 59.3% of the GDP [Rs18.9 trillion] by March 2017,” claimed the finance minister before the National Assembly on Tuesday.
However, what he did not inform the lower house was that it was net public debt — the new term coined by him. Before this, the country’s debt used to be presented as ‘public debt’, as is evident from the last Economic Survey of the PPP government.
According to the original debt definition under the 2005 law, “total public debt is a sum of total outstanding borrowings”. Last year, it got changed to “total public debt means the debt of the government serviced out of the Consolidated Fund and debts owed to the International Monetary Fund”. This excluded the public debt contracted by public sector enterprises and publically guaranteed debt.
Jul 26, 2017 0
Jul 26, 2017 0
Jul 26, 2017 0
Jul 26, 2017 0
Special coverage on China's Two Party Sessions by The Daily Mail - People's Daily