P L D 2000 SC 225




Frame (4)

(a) Constitution of Pakistan (1973), Arts. 73, 74, 78, 79, 80, 81, 82, 166 & Federal Legislative List, Entries 9 & 10Rules of Business [Federal Government]. Sched. II, R.3(3), Entries, No.13(6)(7) & 16.

A study of these Articles shows that the Federal Government has the power to frame the financial, economic and fiscal policies of the State and also to provide necessary legal framework to execute such policies. It is the Federal Government which has the authority under the Constitution to operate and issue guarantees on the security of the Federal Consolidated Fund under such limits as may be fixed by an Act of the Parliament. However, no such law framed y the Parliament was referred. In the absence of such a law, the Government exercises unrestricted powers to borrow against the security of the Federal Consolidated fund or the Public Account of the Federation. Though variety of rules such as Treasury Rules exist but in the absence of specific laws and rules pertaining to borrowing, it is practically and ultimately the Rules of Business which are resorted to regulate the business of the Federal Government. Rules of Business [Schedule II, specified in Rule 3(3)] indicate at Entry No. 13 ‘Finance Division’ and the functions assigned to the said Division. In sub-Entries 6 and 7 thereof, following items have been mentioned:-

Public debt of the Federation both internal and external; borrowing money on the security of the Federal Consolidated Fund;

Loans and advances by the Federal Government.

It follows from these provisions of the Rules of Business that the lending and borrowing operations of the Federation are performed by the Ministry of Finance within the framework provided in the Rules of Business. No specific guidelines appear to have been provided to regulate and streamline such functions. It may, therefore, be inferred that the Secretary Finance or at best of Minister for Finance are free to make decisions on these subjects, though they may consult the Prime Minister if the matter is considered, in the discretion of the Secretary Finance or the Minister for Finance, to be an important policy matter. Rule 16 which specifies the cases required to be brought before the Cabinet does not contain borrowing proposals and as such even the Cabinet is not required to betaken into confidence. It will, therefore, be seen that neither the borrowings are restricted for specific uses not the expediency of the situation necessitating borrowings has been spelled out. This situation of wide flexibility confers on the Finance Division unique and unlimited powers to borrow without at all being bothered about the productivity of the uses to which borrowed resources are applied or even without there being any limitation to the extent to which the nation is to be burdened with borrowings.

As regards the revenues and loans credited to Federal Consolidated Fund and to Public Account, expenditures are incurred without regard to the sources of funds. It appears that no accounting is done for identifying the liabilities created by certain expenditures as revenues are mixed up with proceeds of loans and both are treated at par. This situation prevails as regards the borrowings both from foreign lenders as well as domestic lenders, as no distinction is made whether the borrowing is in rupee or in foreign exchange or from local and foreign markets. It is only the Government in power which is to decide freely the mix between the foreign and local borrowings or in rupee or in foreign exchange. Under the Federal Legislative List, Entries Nos. 9 and 10, make the subjects of foreign loans and foreign aid, Federal subjects. [p. 399] E

As regards implications emerging from the legal provisions on the subject, the Federal Government enjoys borrowing powers under Article 78 of the Constitution. The mandate of Article 79 of the Constitution, however, is that an Act of the Parliament has to regulate-

(a) the custody of the Federal Consolidated Fund;

(b) the payment of moneys into that Fund;

(c) the withdrawal of moneys therefrom;

(d) the custody of other moneys received by or on behalf of the Federal Government;

(e) their payment into, and withdrawal from, the Public Account of
the Federation; and

(f) all matters connected with or ancillary to the matters aforesaid.

This mandate has not yet been obeyed and complied with as no enactment
has been, till date, framed and enacted by the Parliament. All the above matters are being dealt with under the Rules made by the President which Rules, as commented in one of the paragraphs above, are deficient in many respects and, in any case, cannot be valid substitute of law framed by the Parliament itself. The Rules existing on the subject were probably made pursuant to section 151 of the Government of India Act, 1935, which section provided that the Rules may be made by the Governor-General and by the Governor of Province for the purpose of securing all moneys received on account of revenues of the Federation or of the Province and also with regard to the moneys to be paid onto the Public Account of the Federation or the Province. After the establishment of Pakistan, the Constitutions of 1956 in Article 62, the Constitution of 1962 in Article 38 and the Constitution of 1973 in Article 79 mandated for the enactment of an Act by the Parliament to regulate the custody of the Federal Consolidated Fund, the payment of and withdrawal of moneys into or therefrom as well as custody of other moneys received by or on behalf of the Federal Government, their payment or withdrawal of moneys into or therefrom as well as custody of other moneys received by or on behalf of the Federal Government, their payment or withdrawal from the public Account of the Federation and all matters connected with or ancillary thereto. Reference may also be made to Article 81 of the Constitution of which clause (c) provides that the expenditure charged upon the Federal Consolidated Fund includes all debt charges for which the Federal Government is liable, including interest, sinking fund charges, the repayment or amortisation of capital, and other expenditure in connection with the raising of loans, and the service and redemption of debt on the security of the Federal Consolidated Fund. Reference may also be made to Article 166 of the Constitution which provides that the executive authority of the Federation extends to borrowing upon the security of the Federal Consolidated Fund within such limits, if any, as may from time to time be fixed by Act of Majlis-e-Shoora (Parliament), and to the giving of guarantees within such limits, if any, as may be so fixed. Similar provisions were contained in the Constitutions of 1962 and 1956 in Articles 139 and 115 respectively. In the absence of any such enactment providing guidelines and fixing the limits up to which the borrowing power can be exercised by the Federation, it was argued that the charged expenditure enjoys the protection of complete insulation from parliamentary oversight as on the one hand, no guidelines exist and, on the other, such expenditure can be debated but is not to be put to vote. Moreover, the Federal Government has complete freedom to manage the finances of the Federation and this unrestricted power has plunged the nation into huge indebtedness and has reined the economy. It would be seen that for almost fifty years we have not been able to obey the mandate of the Constitution by not enacting appropriate law defining the borrowing powers, the purposes, the use and limit of the exercise of such power. The contracts of billions of dollars burdening the nation through execution of sovereign guarantees are being entered into without information of even of the members of the cabinet, what to say of obtaining approval of the National Assembly by a member of bureaucracy or advisor appointed by Prime Minister in his sole discretion injudiciously. The contract executed with I.P.Ps. provides sufficient basis for providing prudential laws and making approval of such contracts by the National Assembly mandatory. such a law should e enacted without further loss of time so that prudential measures could be adopted so as to regulate management of Federal Consolidated Fund as well as Provincial Consolidated Funds and Public Account and the borrowing powers of the Federation particularly. [p. 403, 404] F

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