Ministry stops PSEs from depositing funds in private banks
- Withdraws at least four office memoranda that allowed Public Sector Entities and local/ autonomous bodies to deposit their funds in private banks
ISLAMABAD: The finance ministry has barred Public Sector Entities (PSEs) and local/ autonomous bodies working under the federal government from depositing working balances and surplus funds in private banks, well-informed sources have told Business Recorder.
According to the sources, the ministry has withdrawn at least four office memoranda which allowed PSEs and local/ autonomous bodies to deposit their funds in private banks.
Citing the memorandums issued on July 2, 2003, September 6, 2004, September 22, 2005, and December 23, 2014 on the matter, the finance ministry clarified that Article 78 of the Constitution stipulates that all money received by or on behalf of the federal government are deposited either as part of the Federal Consolidated Fund (FCF) or Public Account of the Federation (PAF).
The ministry says that the cash balances of both FCF and PAF are maintained in Central Account No. 1 (Non-Food) at the State Bank of Pakistan. Under Article 79 of the Constitution, the custody, payment of money there into and withdrawal there from, shall be regulated by an Act of Parliament.
The federal government promulgated the Public Finance Management (PFM) Act 2019, which is applicable to all matters of FCF and PAF. According to Section 2(s) of the PFM Act, public money mean the money forming part of the FCF and PAF.
In terms of Section 22 of the Act, the operations of the FCF and PAF shall vest in the finance division, under the overall supervision of the federal government.
Section 23(2) of the Act requires that no authority shall transfer public money for investment or deposit, from the government account including the Assignment Accounts, to other bank accounts without prior approval of the federal government.
Furthermore, Section 45 of the Act provides overriding effect over all other laws and any law inconsistent with this Act.
Rule 4(4) of the Cash Management and Treasury Single Account Rules, 2020 stipulates that no authority shall transfer public money in contravention of sub-section (2) of Section 23 of the Act.
After explaining the background of the matter, the finance ministry has stated that in order to align the existing arrangements with constitutional and legal provisions, the finance division’s office memoranda Nos. F.4(1)/2002-BR-!I of July 2, 2003, September 6, 2004, September 22, 2005 and December 23, 2014 have been withdrawn with immediate effect.
Furthermore, the approval accorded to any Public Sector Entity with respect to maintaining a working balance has also been withdrawn.
Copyright Business Recorder, 2022
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