By Abdul Wajid Khan ISLAMABAD, Feb 18 (INP-WealthPK): The Ministry of Finance has planned to bring down Pakistan’s public debt to 60% of the gross domestic product (GDP) by the financial year 2026-27, and further reduce it to 50% of GDP by the financial year 2036-37. According to an official brief of the Ministry of Finance, a copy of which is available with WealthPK, the ministry has proposed amendment to Fiscal Responsibility and Debt Limitation Act (FRDLA) to ensure that over next six years, after the financial year 2020-21, the total public debt shall be reduced to 60% of GDP. Under the Act, the government will further ensure that, after the financial year 2026-27, the total public debt shall be reduced by 1% every year to reduce the total public debt to 50% of GDP by the financial year 2036-37. The Standing Committee of the National Assembly on Finance on Wednesday cleared the FRDLA Bill 2021 after detailed deliberations. A member of the committee, Syed Naveed Qamar, said the successive governments have been constantly violating the FRDL law by breaching the limit because under this law debt to GDP ratio should not be higher than 60% of GDP. He added that if the government violates the law in any circumstance, it should be bound under the law to get approval from the National Assembly. According to the Finance Ministry, Pakistan's debt to GDP ratio remained at 83.5% at end of June 2021. Under the law, the government will establish Debt Management Office (DMO) in the Ministry of Finance for effective planning and execution of related functions. The FRDL Bill provides for reduction of federal fiscal deficit and ratio of public debt to GDP to a prudent level by effective public debt management. The Finance Ministry brief further states that the proposed amendments to the FRDL Act, 2005 are expected to assist the government to limit the stock of government guaranties at 10% of GDP, publication of medium-term national macro-fiscal framework, and to institutionalise debt management functions in a single office reporting to the finance secretary instead of the finance minister. Under the bill, ceiling on the stock of total public debt has been proposed to be at 60% of GDP, while ceiling on stock of outstanding guarantees has been proposed to be 10% of GDP. Also, ceiling on new guarantees issued during a fiscal year has been proposed to be 2% of GDP, while ceiling on the stock of total public debt and guarantees has been proposed to be at 70% of GDP. It added that conditions for the departure from the intended fiscal and debt reduction paths have been made more generalised to allow for unforeseen circumstances as determined by the National Assembly. Previously, this departure was allowed for reasons of national security or calamity. Under the bill, additional responsibilities have been assigned to DMO which include the preparation of medium-term debt management strategy in line with Medium Term Budgetary Framework (MTBF), maintenance of record of public debt and guarantees with the help of State Bank of Pakistan (SBP), Central Directorate of National Savings (CDNS) and the Ministry of Economic Affairs (MoEA). The DMO will prepare annual borrowing plan, raise domestic debt through government securities, formulate and implement process 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 wings for debt raise for balance of payment support, coordinate with the Ministry of External Affairs in raising external debt and prepare policy guidelines to raise external debt. According to the SBP, Pakistan’s total debt and liabilities have reached around Rs50.48 trillion at the end of September 2021 and this amounts to 93.7 percent of the GDP. The SBP data also showed total public debt at Rs41.47 trillion at the end of September 2021. These figures suggest that the current state of public debt is higher than its desired limit. There is a dire need to control the current pace of increase in public debt by maintaining strict financial discipline and carrying out prudent public debt management.