ISLAMABAD: Some officers of the Ministry of Finance have allegedly tampered with an official file that is being prepared on the directions of a cabinet body to determine the quantum of contingent liabilities, which have already reached Rs1.3 trillion by September 2018.
Budget wing officials have allegedly removed a dissenting note of the Debt Policy Coordination Office of the finance ministry, officials in the ministry told The Express Tribune. The debt office penned the note in response to observations made by the budget wing on the nature of contingent liabilities that should be included in an ongoing in-house exercise.
The incident took place in the last week of December and came to the knowledge of the debt office when the file was returned to it for further deliberations, they added. However, the original note is still part of the debt office record.
The Economic Coordination Committee (ECC) of the cabinet had directed the finance ministry to prepare a position paper on the status of the contingent liabilities. The contingent liabilities are not direct responsibility of the federal government but are backed by the sovereign guarantees.
The contingent liabilities stood at Rs1.253 trillion as of end September, according to the finance ministry. These include Rs1.2 trillion guarantees in the domestic currency and Rs59 billion in foreign currency.
However, the Rs1.3 trillion guarantees do not reflect the full picture, as there are certain contingent obligations that are not recorded in the Ministry of Finance. In order to address this issue, the ECC had directed it to reconcile the data.
Finance Minister Asad Umar wanted full disclosure of the contingent liabilities, whether they are explicit or the implicit guarantees, to ensure transparency and analyse their fiscal implications, said finance ministry spokesman Dr Najeeb Khaqan.
The debt office prepared a draft position paper in light of the definition of guarantees given in the Fiscal Responsibility and Debt Limitation Act of 2005. The file was then forwarded to the finance secretary who sent it to the budget coordination wing.
The wing raised certain observations like the debt office was not fully reflecting the liabilities position and there was also a need to include losses incurred by state-owned enterprises like Pakistan International Airlines and Pakistan Steel Mills, said sources. The budget wing also wanted the quasi-fiscal operations to be included in contingent liabilities.
The sources said that the debt office did not endorse this position and wrote a dissenting note while referring to the FRDL Act. The “Guarantees include any obligation undertaken to make payment in the event of profit of an undertaking failing short of the specified amount”, according to definition of guarantees given in the FRDL Act of 2005.
Subsequently, the dissenting note was removed from the file, the sources added. The purpose of removing the dissenting note could not be ascertained.
Govt borrows a whopping Rs2.24tr in just five months
If the government includes all the implicit and explicit types of contingent liabilities, the quantum of total liabilities may even jump to over Rs2.6 trillion, the sources added.
The matter of tampering the file had been brought to the knowledge of the office of the finance minister and additional secretary finance budget but no action has been taken against the responsible officers, informed the sources.
However, when The Express Tribune contacted the finance ministry for a version it decided to investigate the matter. “The matter was thoroughly looked into at the highest level and no evidence of any tampering or misplacement of any note was found,” claimed the ministry in its official response. It added that the Finance Division works in a very professional manner and such instances neither occur, nor would be tolerated.
Despite expectations, Pakistan gets just $1.5b in foreign loans
The Debt Policy Coordination Office has been setup under the FRDL Act and it directly works under the supervision of the finance minister. Under the law, it should consist of three directors out of whom two directors shall be from the private sector and one of the directors shall be designated as director general.
However, there is only one director currently serving in the debt office and the position of the director general remains vacant.
One of the functions of the debt office according to section 13 of the law is to “provide consistent and authenticated information on public and external debt and government guarantees including total guarantees outstanding”.
The budget wing also desired that the debt office should collect the data of contingent liabilities from other government departments and get it verified. But this is not the mandate of the debt office and this function can only be performed by either the budget wing or the corporate affairs wing of the finance ministry.
Published in The Express Tribune, January 10th, 2019.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.