• Login
  • Home
  • Pakistan
  • International News
  • Business
  • Sports
  • Entertainment
  • Opinion
No Result
View All Result
  • Home
  • Pakistan
  • International News
  • Business
  • Sports
  • Entertainment
  • Opinion
No Result
View All Result
Time of Pakistan
No Result
View All Result
Home Opinion Editorials

Provincial governments’ overdraft limits

ToP by ToP
September 16, 2010
in Editorials
0
0
SHARES
2
VIEWS
Share on FacebookShare on Twitter

EDITORIAL (September 16 2010): State Bank of Pakistan, besides shouldering a number of other responsibilities, is also a banker to the Federal and provincial governments. In this capacity, it prescribes overdraft (OD) limits to these entities known as “Ways & Means” to overcome cash flow mismatch during a certain period of time.
According to a news item in the “Business Recorder” on 14th September, Federal government, on the request of provinces, has granted approval for the enhancement of their OD limits to meet their current expenditures, in case of non-availability of funds. OD, it may be mentioned, is a limit upto which an account holder could borrow from a bank if there are no funds in its account. The case is predicated on the argument that provinces are entitled to the enhanced facility because of the 50 percent increase in salaries of the government employees announced in the FY11 budgets.
It is reported that all the four provinces, ie Punjab, Sindh, KP and Balochistan, have asked to increase their present OD limits from Rs 26.9 billion, Rs 9.9 billion, Rs 5.5 billion and Rs 4.5 billion to Rs 37.2 billion, Rs 15.00 billion, Rs 10.1 billion and Rs 7.1 billion respectively. The State Bank is expected to sign the new arrangement with the provinces after proper approval of the central government is conveyed to it.

Formal approval of the Federal government or its advice to the central bank on the above lines, in our view, would be both ill-timed and against the spirit of the State Bank of Pakistan (Amendment) Act 1997 which states very explicitly that the Central Board of SBP will “determine and enforce, in addition to the overall expansion of liquidity, the limit of credit to be extended by the Bank to the Federal government, provincial governments and other agencies of the Federal and provincial governments for all purposes, it being understood that the governments will meet their additional credit requirements directly from commercial banks through market based auctioning system to be conducted by the Bank”.

It is very clear from this clause of the Act that it would not only be improper for the Federal government to ask the SBP to raise OD limits of the provincial governments but it too is dependent on the Central Board of the SBP for any adjustment in its borrowing limit. There is some provision for the revision in borrowing limits of the governments in the clause pertaining to the Monetary and Fiscal Policies Co-ordination Board but the reconsideration of limits is subject to certain conditions and Governor, SBP is an important member of this Board.
Therefore, determination of OD limits is almost exclusively the domain of the SBP and such an authority/autonomy was deliberately made a part of the revised Act to empower it to formulate and monitor monetary and credit policy of the country to ensure monetary stability. As such, Federal government is not supposed to play a major role in this particular field.
However, the issue of higher OD limits could be resolved if the Board of SBP is convinced about the desirability of such a step after taking into account all the relevant factors like the pressing needs of the provincial governments and the current SBA with the IMF. Even in that case the State Bank needs to act in accordance with the exigency of the situation. Unfortunately, inflation rate in the country at present is around 13 percent and could accentuate further in the coming months due to a variety of reasons.
Increase in provincial governments’ spending encouraged by such a step would accelerate inflationary impulses in the economy and undermine efforts to promote monetary stability. In our view, provincial governments, on the other hand, should be asked, rather forcefully, to depend on their own resources and live within their means, especially after the recent NFC Award and the 18th Amendment.
It should be clearly understood that there has been a marked shift in political and financial powers from Islamabad to the provinces. The chief ministers now need to hold meetings of provincial finance commissions to distribute onward the provincial pie to district level. Education, health, irrigation and local projects need to be financed at the third tier of government. Lahore, Karachi, Peshawar and Quetta need to devolve powers downwards for efficient delivery mechanism evolved in true spirit.
In case they want to increase their spending on certain projects or raise current expenditures, higher financing needs should be met by mobilising additional resources from agricultural income tax or other revenue generation measures to maintain proper financial discipline in the country which is a must in the current environment. The new Governor of the SBP is definitely aware of all the relevant issues and, hopefully, would act in a prudent fashion to discharge his responsibility to maintain stability in the value of the rupee – Brecorder

Previous Post

World’s longest table seats 2,700 for lunch

Next Post

Water level exceeds maximum limit at Manchar Lake

ToP

ToP

Related Posts

Pakistan not surprised by Biden’s intent to review US-Taliban deal
Editorials

Pakistan not surprised by Biden’s intent to review US-Taliban deal

by Jameel Ahmad
January 25, 2021
Pulwama Attack: 10 Questions Indians should ask their Govt, Media
Editorials

Pulwama Attack: 10 Questions Indians should ask their Govt, Media

by Jameel Ahmad
January 20, 2021
Conflict Brewing in the E-Commerce Arena of Educational Products for Children
Editorials

Conflict Brewing in the E-Commerce Arena of Educational Products for Children

by Jameel Ahmad
November 27, 2020
TTP regroups with JuA, HuA in Afghanistan
Editorials

TTP regroups with JuA, HuA in Afghanistan

by Jameel Ahmad
August 19, 2020
Virulence of Bats-Caused Diseases
Editorials

Virulence of Bats-Caused Diseases

by ToP
June 25, 2020
TRUMP’S VISIT INDIA
Editorials

TRUMP’S VISIT INDIA

by ToP
March 3, 2020
Tik Tok Addiction
Editorials

Tik Tok Addiction

by ToP
March 3, 2020
Next Post

Water level exceeds maximum limit at Manchar Lake

Popular Stories

  • Pakistan, India may allow bank branches

    Pakistan, India May Allow Bank Branches

    0 shares
    Share 0 Tweet 0
  • Bodybuilding Champion Found Happiness in God, not Competition

    0 shares
    Share 0 Tweet 0
  • New Poverty Line Makes A Third Of Pakistanis Poor

    0 shares
    Share 0 Tweet 0
  • 12-year-old British Pakistani boy makes £290,000 during summer holidays

    6800 shares
    Share 0 Tweet 0
Time of Pakistan

About Times Of Pakistan

kralbetbetturkeyikimislibahis1xbetm.infohipas.infohttps://www.wiibet.com/restbetcdn.com

Other Categories

  • Beautiful Pakistan
  • Fashion News
  • Funny News
  • Viral Videos
  • Weird News

Recent Posts

  • 11th J.A. Zaman Memorial Open – Powered by Gem Golfers
  • Imran Khan and Bushra Bibi Sentenced to Jail in £190 Million Case
  • World’s Largest Submarine Cable Arrives in Pakistan: Could This End Internet Woes?

Times Of Pakistan © 2024. Design & Developed by E2E Solution Providers.

No Result
View All Result
  • Home
  • Pakistan
  • International News
  • Business
  • Sports
  • Entertainment
  • Opinion

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In