September 27, 2019 (MLN): The Finance Ministry of Pakistan recently released a document containing details about Treasury Single Account (TSA), which is a “Unified structure of government bank accounts” that involves a top account, usually at the central bank, through which the government transacts all its receipts and payments and gets a consolidated view of its cash position at the end of each day.
As per the document, the above mentioned policy is a vital instrument devised by Finance Division for improved Public Finance Management with the objective of timely availability of cash to meet obligations, economizing on cash within Government so as to save interest costs and management of government’s cash flows efficiently in a way that benefits debt management, and monitory policy.
Regardless of the intentions behind its implementation, TSA is known for reducing banks’ profitability, as banks would no longer be able to benefit from floats, payment inefficiencies and delays, for instance, by investing in government securities that generate interest income.
In spite of a clearly stipulated legal regime, a huge amount of cash is held outside the TSA structure on a number of arguments, which include statutory requirements as different statutes conceive independent funds for the entities created under them consisting of a portion of money from public fund and the rest from other sources.
Secondly, most of the defence organization and strategic entities transfer the public money into private commercial accounts on the argument of strategic secrecy.
Moreover, some public entities take out public money into their private accounts on the argument of functional independence. Some public money is transferred into private accounts also due to geographical reasons and inaccessibility or remoteness of the treasury and banking facility.
Lastly, public money invested in to the commercial operations is taken out of the TSA most of the times and treated under a different cash and accounts management regimes governed under special laws/rules.
Earlier in April, Moody’s had forecasted that the introduction of TSA would be credit negative for banks in Pakistan, especially the National Bank of Pakistan, given that government deposits comprised 29% of its total deposits at year-end 2018.
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