Finance Ministry Bars PSEs from Depositing Funds in Private Banks

The Ministry of Finance has prohibited Public Sector Entities (PSEs) and autonomous bodies under the federal government from depositing working balances and surplus funds in private banks.

Sources told Business Recorder that the ministry had withdrawn at least four office memoranda that allowed PSEs and autonomous bodies to deposit their funds in private banks.

The ministry stated that all the money received by the federal government or on behalf of the government is deposited as part of the Federal Consolidated Fund (FCF) or Public Account of the Federation (PAF), according to Article 78 of the constitution. Furthermore, the FCF’s and PAF’s cash balances are maintained in Central Account No. 1 (Non-Food) at the State Bank of Pakistan (SBP), only to be withdrawn by an Act of Parliament under Article 79 of the constitution.

The federal government had also legislated the Public Finance Management (PFM) Act, 2019, in this regard, according to which public money is to be a part of the FCF and the PAF. As per Section 22 of the act, all the decisions regarding the FCF and the PAF are within the purview of the Finance Division under the supervision of the federal government.

The act also clarifies that no authority has the right to transfer public money for investment or deposit without the government’s approval. Additionally, Section 45 of the PFM provides an overriding effect over all other laws and any law inconsistent with this act.

After explaining the background of the matter, the Ministry of Finance has stated that at least four of the finance division’s office memoranda have been withdrawn immediately to align the existing arrangements with constitutional and legal provisions.