truthfollower
BANNED
- Joined
- Mar 8, 2019
- Messages
- 1,841
- Reaction score
- -4
- Country
- Location
IMF single account call may cause civil-military row
October 27, 2021
As the IMF is seeking from Pakistan to transfer all government accounts to the State Bank of Pakistan and put it in a single account under its phase II financial sector reforms, the move may become a bone of contention between the civil-military establishment.
It comes against the backdrop of PM Imran Khan issuing the much-awaited notification of the new DG ISI after over two weeks' delay. A perception that the delay in notification caused tension between civil-military ties, gained traction. However, the notification helped remove some clouds of uncertainty.
In Pakistan, the IMF financial reform II will affect Strategic Plans Division (SPD), all three services, Joint Staff Headquarters (JS HQ), ISI, and also “command funds” at all levels. The command funds are on government’s authorized titles like names of units, for example. In all the countries where it has experimented, no special clauses for security establishment were allowed by the IMF.
The IMF's policy of the treasury single account condition has been experimented in Latin America and some African Countries like Nigeria so far, and all had many controversies related to this policy.
It is believed that there were up to 30,000 bank accounts maintained by the defense ministry, and the armed forces that have to be closed under the second phase of the financial management reforms in Pakistan.
The way it works is that all accounts of government setups with other banks need to be closed and transferred to SBP, or all bank accounts to be swept at the close of business every day and transferred to the SBP account.
In simple words “all money belonging to the national treasury, not in use is gathered in a single account in SBP so that instead of wasting in various small portions it can be used by government instead of borrowing from outside", as the theory goes.
The banks are currently using these funds, and are also lending to the government out of them. Thus, it is ostensibly aimed at reducing or avoiding situations where some departments may maintain credit balances while others are overdrawn. This will help the government reduce internal expenses/internal loan expenditure.
It will also likely reduce bank profitability and banks will have to compete for funds from the market which will limit the flow of cash, warns financial experts. "This phenomenon will reduce inflation and rupee devaluation, but will also reduce investment and private sector funding thus reducing GDP growth", they quipped.
In the nutshell, the theoretical benefits of the Treasury Single Account policy have not materialized anywhere on the ground, though theoretically they should follow. It has been observed that the TSA only slowed down the economy and delayed the creation of jobs instead of materializing theoretical benefits.
If this condition of the IMF is fulfilled (most likely it has been agreed to by the PTI government) special security provisions for the establishment especially ISI, MI, MO, and SPD should be made to exclude secret funds from the TSA. This will also help avoid friction between civil-military leadership.
The challenge for the government is that if it fails to implement the financial reform, it may endanger the next IMF program worth $6 billion. It simultaneously underscores the PTI government’s failure to convince the IMF of the country-specific context of Pakistan and the sequencing of the TSA reform.
https://www.thenews.com.pk/print/903499-imf-single-account-call-may-cause-civil-military-row
Treasury Single Account: An Essential Tool for Government Cash Management
October 27, 2021
As the IMF is seeking from Pakistan to transfer all government accounts to the State Bank of Pakistan and put it in a single account under its phase II financial sector reforms, the move may become a bone of contention between the civil-military establishment.
It comes against the backdrop of PM Imran Khan issuing the much-awaited notification of the new DG ISI after over two weeks' delay. A perception that the delay in notification caused tension between civil-military ties, gained traction. However, the notification helped remove some clouds of uncertainty.
In Pakistan, the IMF financial reform II will affect Strategic Plans Division (SPD), all three services, Joint Staff Headquarters (JS HQ), ISI, and also “command funds” at all levels. The command funds are on government’s authorized titles like names of units, for example. In all the countries where it has experimented, no special clauses for security establishment were allowed by the IMF.
The IMF's policy of the treasury single account condition has been experimented in Latin America and some African Countries like Nigeria so far, and all had many controversies related to this policy.
It is believed that there were up to 30,000 bank accounts maintained by the defense ministry, and the armed forces that have to be closed under the second phase of the financial management reforms in Pakistan.
The way it works is that all accounts of government setups with other banks need to be closed and transferred to SBP, or all bank accounts to be swept at the close of business every day and transferred to the SBP account.
In simple words “all money belonging to the national treasury, not in use is gathered in a single account in SBP so that instead of wasting in various small portions it can be used by government instead of borrowing from outside", as the theory goes.
The banks are currently using these funds, and are also lending to the government out of them. Thus, it is ostensibly aimed at reducing or avoiding situations where some departments may maintain credit balances while others are overdrawn. This will help the government reduce internal expenses/internal loan expenditure.
It will also likely reduce bank profitability and banks will have to compete for funds from the market which will limit the flow of cash, warns financial experts. "This phenomenon will reduce inflation and rupee devaluation, but will also reduce investment and private sector funding thus reducing GDP growth", they quipped.
In the nutshell, the theoretical benefits of the Treasury Single Account policy have not materialized anywhere on the ground, though theoretically they should follow. It has been observed that the TSA only slowed down the economy and delayed the creation of jobs instead of materializing theoretical benefits.
If this condition of the IMF is fulfilled (most likely it has been agreed to by the PTI government) special security provisions for the establishment especially ISI, MI, MO, and SPD should be made to exclude secret funds from the TSA. This will also help avoid friction between civil-military leadership.
The challenge for the government is that if it fails to implement the financial reform, it may endanger the next IMF program worth $6 billion. It simultaneously underscores the PTI government’s failure to convince the IMF of the country-specific context of Pakistan and the sequencing of the TSA reform.
https://www.thenews.com.pk/print/903499-imf-single-account-call-may-cause-civil-military-row
Treasury Single Account: An Essential Tool for Government Cash Management
Last edited:
