1. Effective Debt Management
PRIME National Debt Conference 2015 Islamabad, December 12, 2015
Effective Debt Management
Abdul Wajid Rana

2. Layout of this Presentation
Principles of Fiscal and Debt Management
Assessment of FRDLL Performance
Design Shortcomings
Debt Management: Current Practice
Recommendations

3. Principles of Fiscal & Debt Management
Reduce Revenue Balance to zero by June 30, 2008 and thereafter maintaining a revenue surplus
Reducing Public Debt by 2.5% of GDP to bring it down to 60% of GDP by June 30, 2013 and thereafter maintaining it below 60%
Social and Poverty alleviation expenditures shall not be reduced below 4.5% of GDP annually
Budgetary Allocation for Education and Health to double by 2013 from 2005 level of 2.5% of GDP

4. Principles of Fiscal & Debt Management
Issuance of New Guarantees including renewals not to exceed beyond 2% of GDP
Escape Clause-National Security or Natural Calamity
Such Departure should be temporary
Finance Minister to give reasons & measures with time line to revert to stipulated path
Sanction—Reputation but no penalty

5. Principles of Fiscal & Debt Management
Public Disclosure in January and June every year
- Fiscal Policy Statement
Debt Policy Statement
Medium Term Budgetary Statement
Statements of Responsibility by the Finance Minister and Secretary Finance
Establishment of DPCO

6. Actual for Financial Year
Debt Management by GOP
FRDL Target
Actual for Financial Year
Target
Date
2008
2009
2010
2011
2012
2013
2014
2015
Revenue Balance
By 6/30/2008
-3.5
-1.7
-1.9
-3.7
-2.8
-3.1
-1.5*
-1.7*
Public Debt
(as % of GDP)
< 60
By 6/30/2013
59.7
59.5
61.3
59.4
63.7
63.0
64.9
64.6
Reduction in Public Debt/GDP
2.5 <
Annually
-3.9
-1.0
1.9
-4.3
0.7
0.3
PRSP Exp
4.5 <
6.3
6.6
6.5
7.4
8.7
7.7
7.9
Education & Health Exp/GDP
Double
2.4
2.5
2.3
2.6
2.8
2.9
3.0
New government guarantees
2.0
1.3
2.1
1.5
1.0
0.6
0.4

7. Total Loan Contracted ($ Million)
Year
PPP
PML (N)
Bilateral/
Multilateral
IMF
Bilateral/ Multilateral
FY2009
4,797.9
FY2010
4,564.7
7,400
FY2011
2,738.1
FY2012
4,018.1
FY2013
1,277.6
FY2014
13,165
6,640
FY2015
3,633
FY2016
1,500
Total
17,396.4
18,298

8. Transparency Issues Authority MOF SBP Off-Budget Debt Recent Change
Public Debt Definition
MOF
Government Domestic & External Debt and IMF debt
SBP
Government Domestic & External Debt, IMF debt and External Liabilities
Off-Budget Debt
Private Sector External Debt, PSEs domestic and External Debt, Commodity Operations, Intercompany External Debt from direct investor abroad
Recent Change
Non-Plan Debt Excluded from Public Debt
Total Debt & Liabilities of Pakistan
FY2014 (72.7%), FY2015 (72.5%)
FY2015 Q1 (67.5%)

9. Domestic Debt Management
Permanent Debt
Floating Debt
Unfunded Debt
FEBC/US $ Bearer Certificate
Market Loans
NSS-PLI
T-Bills on Tap
Commodity Operation
GP Fund
FG Bonds/
MTBs-Auction
40% of total
37% of total
20% of total
3% of total
Managed/Need Basis
On Tap- No Control
On Tap
Managed

10. Public Debt Management Issues
Off-budget Non-Plan Guaranteed Debt
No Borrowing Limits by NEC- Article 167 (4)
Role of CCI (Supervision and Management of Public Debt)
Role of Monetary and Fiscal Coordination Board
Subservient DPCO
Borrowing for External Debt Servicing and not Capital Investment

11. Debt Management: Current Practice
Institutional fragmentations
inhibits effective debt
Management
Ministry of Finance
Finance Division
Budget Wing
(MTBs, PIBs, Sukuks)
External Finance Wing
(Eurobond, FX Commercial Borrowing)
Debt Policy Coordination Office (Coordination, Monitor & Analyze
Central Directorate of National Savings
(NSS)
Economic Affairs Division
(PPG-WB, ADB, IDB
Paris Club, Other Bilateral)
State Bank of Pakistan
(Govt Agent for MTBs, PIBs & Sukuks

12. Net Transfers As % of GNI
Year
Net Flows
(US $ M)
Net Transfers
Net Flows/ GNI%
Net Transfers/ GNI%
1970
433
369
4.3
3.6
1980
1,021
819
4.0
3.2
1990
1,228
778
2.9
1.9
2001
1,149
431
1.7
0.8
2010
2,966
2109
1.6
1.1
2013
-2,546
-3,479
-1.1
-1.4
2014
4,760
3,745
1.65
1.3

13. 8th Review of EFF MoF will seek Fund’s advice to: Strengthen FRDL Act
Provide Medium-Term Orientation of the budget process
Policy Coordination across all layers of government
To improve policies and procedures for government guarantees and risk management
Seek Technical Assistance
Systematically account for fiscal costs and contingent liabilities associated with the broader PSEs, PPPs and SPVs

14. Recommendations Organizational Framework
Debt Management Objectives and Borrowing Purposes
Financing the deficit
Re-financing the outstanding debt
Support to the balance of Payment
Capital Expenditure Investment
Fostering the development of the financial markets
Supporting Monetary Policy Objects (Draining Liquidity
Stipulation of Golden Rule: Brazil and UK
Debt Management Coordination
Transparency and Accountability
Institutional Framework

15. Recommendations Analytical Framework Operational Framework
Debt Management Strategy
Risk Management Framework
Operational Framework
Efficient Market for Government Securities

16. Public Debt Management Strategy
Macroeconomic & Macro-Fiscal Framework
Debt Management Development
Information on Cost and Risk
Consistency/ Constraints
Medium Term Debt Management Strategy
Demand Constraints
Constraints
Information on Cost and Risk
Cost and Risk Analysis

17. Recommendations Role of CCI Role of NEC Role of MFCB
Add Expenditure Rule (adjusting expenditures both at federal and provincial level in case revenues fall short of target determined under the Revenue Rule)
Golden Rule (Brazil, UK)

18. Recommendations
Escape clause be made more stringent and there should be Parliamentary Oversight mechanism to ensure adjustment of deviation within stipulated time frame
Add a clause for mandatory debate in the Parliament on Government’s Policy Statements and Parliament to give its observations
Borrowing Limits for the Provinces

19. Recommendations Revenue Share under 7th NFC Award
Revenue Share under 7th NFC Award
Borrowing Limit (in terms of GDP)
Borrowing Envelope  (Rs. Billion)
Punjab
51.74%
0.26%
79.3
Sindh
24.55%
0.12%
37.6
Khyber Pakhtunkhwa
14.62%
0.07%
22.4
Balochistan
9.09%
0.05%
13.9
Total
100%
0.5%
153.4

20. Recommendations-Institutional
Consolidating Debt Management and making DPCO as Independent Office as envisaged in the law
Timing Initiatives to improve institutional arrangements &
Capacity
Start
Immediately
~ 3 Years
Full Fledged Debt Management Office
Decision Making Power for all government debt
Central Debt Management Unit
Fast Track T.A. for building debt management capacity
Close Coordination with CDNS, EAD, EF & SBP
Operating under an Advisory Board or FM as originally envisaged

21. Thank You