Act VI of 2005 · 12 pages
PDF viewer not loading? Download the PDF directly or view on Pakistan Code.
THE FISCAL RESPONSIBILITY AND DEBT LIMITATION ACT,
2005
CONTENTS
__________
CHAPTER I
PRELIMINARY
1. Short title, extent and commencement
2. Definitions
CHAPTER II
PRINCIPLES OF SOUND FISCAL AND
DEBT MANAGEMENT
3. Principles of sound fiscal and debt management
CHAPTER – III
ECONOMIC POLICY STATEMENTS
4. Economic policy statements to be laid before the National Assembly
5. The medium term budgetary statement
6. The fiscal policy statement
7. The debt policy statement
8. Disclosure of policy decisions and other matters
9. Measures to enforce compliance
10. Statement of responsibility
11. Measures for fiscal transparency
Page 1 of 12
CHAPTER – IV
DEBT POLICY CO-ORDINATION OFFICE
12. Establishment of the Debt Policy Co-ordination Office
13. Functions of the Office
CHAPTER – V
MISCELLANEOUS PROVISIONS
14. Publication and access of statements
15. Indemnity
16. Application of other laws not barred
17. Power to make rules
18. Removal of difficulties
Page 2 of 12
THE FISCAL RESPONSIBILITY AND DEBT LIMITATION ACT, 2005
ACT NO. VI OF 2005
[13th June, 2005]
1
[An Act to provide for reduction of Federal fiscal deficit and ratio of public debt to gross domestic
product to a prudent level by effective public debt management
WHEREAS it is expedient to provide for reduction of Federal fiscal deficit and ratio of
public debt to gross domestic product to a prudent level by effective debt management and for
matters connected therewith and incidental thereto;
It is hereby enacted as follows:—]
CHAPTER I
PRELIMINARY
1. Short title, extent and commencement.—(1) This Act may be called the Fiscal
Responsibility and Debt Limitation Act, 2005.
(1) It extends to the whole of Pakistan.
(2) It shall come into force at once.
2. Definitions.—In the Act, unless there is anything repugnant in the subject or context,—
(a) “annual budget statement” means the annual statement of the estimated
receipts and expenditures of the Federal Government laid before the National
Assembly under Article 80 of the Constitution 1[of the Islamic Republic of
Pakistan];
1
(b) [* * * * * * *]
(c) “debt reduction path” means 1[the report on] the debt reduction path prepared
by Debt Policy Coordination Office established under clause (b) of subsection
(2) of section 13;
(d) “economic policy statements” means the economic, fiscal and debt policy
statements specified in subsection (1) of section 4;
(e) “fiscal indicators” means the measures such as numerical ratios and
proportions to gross domestic product or revenues for evaluation of the fiscal
position of the Government as may be prescribed;
(f) “guarantee” includes any obligation undertaken to make payments in the event
of the profit of an undertaking falling short of a specified amount;
(g) “Minister” means the Minister for Finance, Government of Pakistan;
(h) “Office” means the Debt Policy Coordination Office established under
subsection (1) of section 12;
1
Subs. Ins. & Omitted by Finance Amendment Act, 2016 (XXIX OF 2016), s.6
Page 3 of 12
(i) “prescribed” means except where otherwise provided, prescribed by rules
made under this Act;
(j) “principle of sound fiscal and debt management” means the principles of
sound fiscal and debt management specified in section 3;
1
[(k) “Federal fiscal deficit” means the difference between total net revenue receipts
and total expenditure of the Federal Government;]
1
(1) [* * * * * * *]
1
[(m) “total expenditure” means a sum of total recurrent expenditure, development
expenditure and net lending of the Federal Government;]
1
(n) [* * * * * * *]
1
[(o) “total public debt” means the debt of the Government (including the Federal
Government and the Provincial Governments) serviced out of the
Consolidated Fund and debts owed to the International Monetary Fund;]
2
[Explanation.—Total debt of the Government is public debt less accumulated
deposits of the Federal and Provincial Governments with the banking system.]
(p) “total revenue” means a sum of tax revenues, non-tax revenues and surcharges
of the Government 1[; and]
1
[(q) “total net revenue of Federal Government” means a sum of tax revenues, non-
tax revenues and surcharges of the Government minus transfer of provincial
share.]
CHAPTER II
PRINCIPLES OF SOUND FISCAL AND
DEBT MANAGEMENT
3. Principles of sound fiscal and debt management.—(1) Subject to subsection (4), the
Federal Government shall pursue its policy objectives in accordance with the principles of sound
fiscal and debt management specified in subsection (3).
1
[(2) The Federal Government shall take all appropriate measures to reduce the Federal fiscal
deficit excluding foreign grants and ratio of total public debt to gross domestic product and maintain
it within prudent limits thereof.]
(3) In particular and without prejudice to the generality of the foregoing provisions, the
following shall be the principles of sound fiscal and debt management, namely:—
1
[(a) limiting the Federal fiscal deficit excluding foreign grants to four percent of
gross domestic product during the three years, beginning from the financial
year 2017-18 and maintaining it at a maximum of three and a half percent of
the gross domestic product thereafter;
1
Subs. & Omitted by Finance Amendment Act, 2016 (XXIX OF 2016), s.6
2
Added by Finance Amendment Act, 2017 (XXVII OF 2017), s.5
Page 4 of 12
(b) ensuring that within a period of two financial years, beginning from the
financial year 2016-17, the total public debt shall be reduced to sixty percent
of the estimated gross domestic product;
(c) ensuring that within a period of five financial years, beginning from the
financial year 2018-19 total public debt shall be reduced by 0.5 percent every
year and from 2023-24 and going up to financial year 2032-33 a reduction of
0.75 percent every year to reduce the total public debt to fifty percent of the
estimated gross domestic product and thereafter maintaining it to fifty percent
or less of the estimated gross domestic product; and]
(d) not issuing new guarantees, including those for rupee lending, bonds, rates of
return, output purchase agreements and all other claims and commitments that
may be prescribed, from time to time, for any amount exceeding two per cent.
of the estimated gross domestic product in any financial year:
Provided that the renewal of existing guarantees shall be considered as
issuing a new guarantee.
(4) The Federal Government may depart from the principles of sound fiscal and debt
management on the ground or grounds of unforeseen demands on the finances of the Government
due to national security or natural calamity as determined by the National Assembly, but when the
Federal Government does so—
(a) any such departure shall be temporary; and
(b) the Minister shall, in accordance with the provisions of this Act, specify—
(i) the reasons for the Federal Government's departure from those
principles;
(ii) the approach or measures the Federal Government intends to take to
return to those principles; and
(iii) the period of time that the Federal Government expects to take to
return to those principles.
CHAPTER – III
ECONOMIC POLICY STATEMENTS
4. Economic policy statements to be laid before the National Assembly.—(1) The Federal
Government shall, in each year, cause to be laid before the National Assembly, the following
statements of economic, fiscal and debt policy, namely:-
(a) the medium term budgetary statement;
(b) the fiscal policy statement; and
(c) the debt policy statement:
Page 5 of 12
1
[Provided that where the National Assembly is not in session, the
statements may be laid in the next session even if it occurs after the end of the
period specified in sub-section (2).]
(2) The economic policy statements specified on subsection (1) shall cause to be laid before
the National Assembly by the end of the period specified in sections 5, 6 and 7.
(3) The economic policy statements shall be in such form as may be prescribed from time to
time by the Federal Government.
5. The medium term budgetary statement.—(1) The Federal Government shall include a
medium term budgetary statement, consistent with the principles of sound fiscal and debt
management, in the annual budget statement to be laid before the National Assembly each year not
later than the thirtieth day of June of each financial year.
(2) The medium term budgetary statement shall set forth a three year rolling target for
economic indicators.
(3) In particular and without prejudice to the provisions contained in subsection (2), the
medium term budgetary statement shall, for the financial year commencing on the first day of July
and the two financial years following that financial year,
(a) indicate explicitly, by the use of ratios or other means the Federal Government's
intentions regarding economic indicators including those specified in subsection (2) of
section 6; and
(b) specify clearly key fiscal measures and risks that the Federal Government considers
important and against which fiscal policy will be set and assessed.
6. The fiscal policy statement.—(1) The Federal Government shall cause to be laid before
the National Assembly the fiscal policy statement by the end of January each year.
(2) The fiscal policy statement shall, inter alia, analyze the following key macroeconomic
indicators, namely:—
(a) total expenditures;
1
[(b) total net revenue receipts;]
(c) total fiscal deficit;
1
[(d) total Federal fiscal deficit excluding foreign grants; and]
(e) total public debt.
1
[(f) debt per capita.]
1
Subs. & Added by Finance Amendment Act, 2016 (XXIX OF 2016), s.6
Page 6 of 12
(3) The Federal Government shall explain how fiscal indicators accord with the principles of
sound fiscal and debt management.
(4) The fiscal policy statement shall also contain—
(a) the key fiscal measures and rationale for any major deviation in fiscal
measures pertaining to taxation, subsidy, expenditure, administered pricing
and borrowing;
(b) an update on key information regarding macroeconomic indicators;
(c) the strategic priorities of the Federal Government for the financial year in the
fiscal area;
(d) the analysis to the fullest extent possible of all policy decisions made by the
Federal Government and all other circumstances that may have a material
effect on meeting the targets for economic indicators for that fiscal year as
specified in the medium term budgetary statement; and
(e) an evaluation as to how the current policies of the Federal Government are in
conformity with the principles of sound fiscal and debt management and the
targets set forth in the medium term budgetary statement in section 5.
7. The debt policy statement.—(1) The Federal Government shall cause to be laid before the
National Assembly, the debt policy statement by the end of January each year.
(2) The purpose of the debt policy statement is to allow the assessment of the Federal
Government's debt policies against the principles, of sound fiscal and debt management and the debt
reduction path.
(3) In particular and without prejudice to the provisions of subsection (2) the debt policy
statement shall, inter alia, contain
(a) assessment of the Federal Government's success or failure in meeting the
targets of total public debt to estimated gross domestic product for any given
year as specified in the debt reduction path;
(b) evaluations of external and domestic borrowing strategies and provide policy
advice on these strategies;
1
(c) [* * * * * * *]
(d) analysis of the foreign currency exposure of Pakistan's external debt;
1
[(e) consistent and authenticated information on public and external debt and
guarantees issued by the Federal Government;]
1
Omitted & Subs. by Finance Amendment Act, 2016 (XXIX OF 2016), s.6
Page 7 of 12
(f) information of all loan agreements contracted, disbursements made thereof
and repayments made thereon, if any, by the Government during the fiscal
year; and
(g) analysis of trends in public debt and external debt and steps taken to conform
to the debt reduction path as well as suggestions for adjustments, if any, in the
Federal Government's overall debt strategy.
8. Disclosure of policy decisions and other matters.—(1) Subject to subsection (3), every
economic policy statement prepared under this Act shall incorporate to the fullest extent possible all
Federal Government decisions and all other circumstances that may have a material effect on the
fiscal and economic situation of the country.
(2) Where the fiscal implications of Federal Government decisions and other circumstances
referred to in subsection (1) can be quantified for particular years with reasonable certainty by the
day on which the statements are finalized, the quantified fiscal implications of those Government
decisions and other circumstances shall be incorporated in the statements.
(3) Nothing in subsections (1) and (2) shall apply to a decision or circumstance where the
Minister determines that to incorporate that decision or circumstance in an economic policy
statement is likely to—
(a) prejudice the substantial economic interests of Pakistan;
(b) prejudice the security or defence of Pakistan or its international relations;
(c) compromise the Federal Government in a material way in negotiation,
litigation or commercial activity; or
(d) result in material loss of value to the Federal Government,
and there is no reasonable or prudent way the Federal Government can avoid this prejudice,
compromise or material loss.
9. Measures to enforce compliance. Notwithstanding anything in subsection (4) of section
3, if the Federal Government continuously fails to meet the target of debt to gross domestic product
ratio specified in the debt reduction path for any given year over the period of two financial years
starting from the first statement which indicates the failure of the Federal Government in meeting the
prescribed target, the Federal Government shall take all necessary measures including the
curtailment of the sums authorized to be paid and applied from, and out of the Federal Consolidated
Fund to return to the debt reduction path latest by the end of the next two financial years:
1
[Provided that nothing in this section shall apply to the expenditure charged upon the Federal
Consolidated Fund.]
10. Statement of responsibility.—(1) 1[Every statement prepared under sections 5, 6 and 7
shall include—]
1
Subs. by Finance Amendment Act, 2016 (XXIX OF 2016), s.6
Page 8 of 12
(a) a statement by the Minister that all policy decisions with material economic or
fiscal implications that the Federal Government has made before the day on
which the contents of the economic policy statements were finalized and all
other circumstances with material economic or fiscal implications of which the
Minister was aware before that day have been communicated to the Secretary
of Finance; and
(b) a statement by the Secretary of Finance that the Ministry has supplied to the
Minister, using its best professional judgment on the basis of economic and
fiscal information available to it before the day on which the contents of the
economic policy statements were finalized, an economic and fiscal statement
incorporating the fiscal and economic implications of those decisions and
circumstances, but any decisions or circumstances that the Minister has
determined under subsection (3) of section 8 shall not be incorporated in that
economic policy statement.
(2) 1[The statement under clause (a) of sub-section (1) shall additionally provide for–]
(a) the integrity of the disclosures contained in the economic policy statements;
(b) the consistency with the requirements of this Act of the information contained
in the economic policy statements; and
(c) the omission from the economic policy statement of any decision or
circumstance specified in subsection (3) of section 8.
11. Measures for fiscal transparency.—(1) The Federal Government shall take appropriate
measures to ensure greater transparency in its fiscal operations in public interest and minimize, as far
as practicable, secrecy in the preparation of the annual budget.
(2) In particular and without prejudice to the generality of the provisions of subsection (1),
the Federal Government shall, at the time of presentation of annual budget, disclose in a statement as
may be prescribed,—
(a) the significant changes in the accounting standards, definitions, policies and
practices affecting or likely to affect, the computation of prescribed fiscal
indicators; and
(b) as far as practicable and consistent with protection of public interest, all
guarantees including those for rupee lending, bonds, rates of return, output
purchase agreement, exchange risk, claims, and commitments made by the
Federal Government having potential budgetary implications, including
revenue demands raised but not realized and liability in respect of major works
and contracts.
1
Subs. by Finance Amendment Act, 2016 (XXIX OF 2016), s.6
Page 9 of 12
CHAPTER – IV
DEBT POLICY CO-ORDINATION OFFICE
12. Establishment of the Debt Policy Co-ordination Office.—(1) Within sixty days of the
commencement of this Act, the Federal Government shall, by notification in the official Gazette,
establish an office to be known as Debt Policy Co-ordination Office. The Office shall-
(a) work under the direct supervision of the Minister;
(b) consist of three directors of whom two directors shall be from the private
sector and one of the directors shall be designated as Director-General.
(2) The directors of the Office shall be appointed for a term of three years and shall be
eligible for reappointment for a similar term. A director shall not be appointed for more than two
terms.
(3) A director of the Office, may be removed by the Federal Government from his office, if
on an inquiry by the Federal Public Service Commission, he is found incapable of performing the
functions of his office by reason of mental or physical incapacity or has been found guilty of
misconduct.
(4) The terms and conditions of service of the director of the Office shall be such as may be
prescribed.
13. Functions of the Office.—(1) The Office shall perform such functions as are specified in
subsection (2) or as may be prescribed from time to time.
(2) Without prejudice to the generality of the foregoing provision, the office shall—
1
[(a) prepare a debt reduction path to achieve the principles of sound fiscal and debt
management;]
(b) monitor and evaluate external and domestic borrowing strategies and provide
policy advice on an appropriate mix of external borrowing from all sources;
(c) monitor the nominal and real costs of external and domestic borrowing and
suggest ways to contain these costs;
(d) analyze the foreign currency exposure of Pakistan's external debt, including
foreign exchange obligations to residents and providing a framework for
foreign exchange risk management;
(e) provide consistent and authenticated information on public and external debt
and Government guarantees including total guarantees outstanding;
(f) prepare a debt policy statement on an annual basis on trends in public and
external debt and implementing adopted debt reduction goals as well as
suggesting adjustments in the Federal Government's overall debt strategy;
1
Subs. by Finance Amendment Act, 2016 (XXIX OF 2016), s.6
Page 10 of 12
(g) provide leadership on debt data questions and ensure compliance with agreed
reporting requirements; and
(h) maintain a centralized and updated electronic record, without prejudice to the
specific responsibilities of the State Bank of Pakistan, Economic Affairs
Division, Budget and External Finance Wings and Central Directorate of
National Savings, of the public and external debts including updated balances
and limits for he total public debt and guarantees.
(3) 1[* * * * * * *]
CHAPTER – V
MISCELLANEOUS PROVISIONS
14. Publication and access of statements.—(1) The 1[Federal Government] shall, in respect
of every economic policy statement referred to in section 4, arrange for publication in the official
Gazette a notice-
(a) indicating, where the statement is published in advance of being laid before
the National Assembly, that the statement has been published; and
(b) specifying a place at which copies of the statement are available for public
free of charge.
1
[(2) The statement published under sub-section (1) shall, within fifteen days of the
publication, be posted on website of the Federal Government.]
15. Indemnity.—No suit, prosecution or other legal proceedings shall lie against the Federal
Government or any office of the Government for anything which is in good faith done or intended to
be done under this Act or the Rules made thereunder.
16. Application of other laws not barred. The provisions of this Act shall be in addition to
and not in derogation of, any other law for the time being in force.
17. Power to make rules.— (1) The Federal Government may by notification in the official
Gazette, make rules for carrying out the purposes of this Act.
(2) In particular and without prejudice to the generality of the foregoing power, such rules
may provide for all, or any of, the following matters, namely:—
(a) the forms of all the economic policy statements specified in section 4;
(b) the smooth functioning of the Office; and
(c) any other matter which is required to be, or may be, prescribed.
1s
Omitted & Subs. by Finance Amendment Act, 2016 (XXIX OF 2016), s.6
Page 11 of 12
18. Removal of difficulties. If any difficulty arises in giving effect to the provisions of the
Act, the Federal Government may, by an Order published in the official Gazette, make such
provisions not inconsistent with the provisions of the Act, as may appear to be necessary for
removing the difficulty:
Provided that no Order shall be made under this section after the expiry of two years from the
commencement of this Act.
(2) Every Order made under subsection (1) shall, as soon as may be, cause to be laid before
the National Assembly.
_____
Page 12 of 12
Source: Pakistan Code, Ministry of Law and Justice (pakistancode.gov.pk). Text on this page is reproduced verbatim from the official PDF and is provided for reference only. For the authoritative version, always consult the source document or a current reported edition.
LexForm advocates handle matters under Fiscal Responsibility and Debt Limitation Act across Pakistan, the UK, the EU, and the US.