Independent agency to manage ever increasing public debt
View(s):The government will establish an independent debt management agency by end December 2023 and implement measures to control ever increasing public debt running up to over Rs. 5 trillion at present.
Currently, public debt is managed by the Central Bank’s Public Debt Department, the Finance Ministry’s External Resources Department and Treasury Operation Department.
It has been planned to complete necessary legislative requirements to establish a Public Debt Management Agency (PDMA) in accordance with international best practices by December 2023 and complete the establishment process of the agency by December 2024, a high ranking Finance Ministry official told the Business Times.
The PDMA will report to and be accountable to the Ministry of Finance but it has substantial operational autonomy with overall policy responsibility for debt management by devising medium-term debt strategies and annual borrowing plans.
It will be the sole authority to direct the implementation of an annual borrowing plans, including taking decisions on auction cut-offs.
The PDMA will manage all domestic and international market based financing decisions and participate in the evaluation of all debt, derivatives, and guarantees, he explained.
Meanwhile the government has raised Rs 5.63 trillion by way of issuing treasury bills, borrowings from the domestic market and provisional advances to finance the high budget deficit during the first eight months of 2023, the ministry’s latest statistics revealed.
It has to borrow a massive sum of money from the domestic market due to the failure to raise the required income from the issuance of treasury bills during the first seven months of this year, rapid increase in the government expenditure and the maturing of local short term debt constantly, a senior ministry official said. He disclosed that the government has borrowed an enormous sum of Rs. 5.63 trillion via the issuance of treasury bills and from the bond market during the past eight months this year.
Quoting the official financial statements, he revealed that the government has to pay an interest of Rs.460 billion for this massive debt.
The Public Finance Management (PFM) Act, which is to be enforced in January 2024, has stipulated a debt ceiling for the Government limiting borrowings from the domestic market.
The new PFM law devised in consultation with IMF staff will be presented in parliament by end December 2023.
It will authorise the budget formulation process, roles and responsibilities of relevant agencies, and information and accountability requirements.
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