P L D 2000 SC 225
DR. M. ASLAM KHAKI
SYED MUHAMMAD HASHIM AND 2 OTHERS
(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
(f) all matters connected with or ancillary to the matters aforesaid.
This mandate has not yet been obeyed and complied with as no enactment