Pakistan's debt structure to undergo drastic changes
The debt management structure of the country is set to undergo its first drastic change in 15 years, as the government plans to abolish the existing 'fragmented set-up' and bring all its functions under one roof to meet the condition of the World Bank for availing the $500m loan.
The new deadline for making these changes is looming as the World Bank Board is scheduled to consider the approval of the loan on May 14. The approval will also mark restoration of the budgetary support after almost three years by the World Bank.
The key features of the new plan include consolidating the debt management functions in the Ministry of Finance and placing the Debt Office under the complete control of bureaucracy by ending the role of the private sector experts.
The process will be completed first by dismantling the existing structure through a notification in the next few weeks and then amending the Fiscal Responsibility and Debt Limitation Act, 2005. The World Bank has linked approval of the $500 million loan with these changes.
"We are recommending the government to restructure the existing mandate into a single debt management office, which is not just a coordinating entity like the Debt Policy Coordination Office (DPCO) that only advises the finance minister," said World Bank Senior Country Economist Mohammad Waheed.
The Express Tribune had reported that the Ministry of Finance ordered to route the files of the Debt Office through an additional secretary finance. But the new details suggest that the government's plans are beyond bringing the Debt Office under the additional secretary's control.
"We do not want to create [an] island of excellence for some time that eventually evaporates," said Waheed while commenting on appointment of the director general of Debt Office from the private sector. "Debt management and fiscal policy in Pakistan is ad hoc and reactive," the economist said, adding that because of fragmentation of work, Pakistan does not have control over debt maturity profile, pricing and borrowing plans and "there is no coordinated investors' relationship".