Draft Public Financial Management law to be submitted for Cabinet approval shortly

• Set to come into effect with budget 2025, replacing the current FMRA
• Proposed FMA also a key condition of IMF’s US$ 3 bn EFF
• Said to be equipped with binding  rules to bring in much needed fiscal discipline

By Nishel Fernando 

The draft Public Financial Management (PFM) Bill is expected to be submitted for Cabinet of Ministers’ approval shortly and thereafter be presented to parliament next February, meeting the deadline set under the International Monetary Fund (MF) programme.

 
“The draft PFM Act will come to parliament in February next year,” Department of National Planning, Director General, R.H.W.A Kumarasiri said recently, attending a panel discussion organised by UNDP in Colombo.
The draft law equipped with binding fiscal rules is aimed at bringing much needed fiscal discipline
by strengthening the fiscal responsibility framework, budget formulation and execution.

It is set to come into effect with the budget 2025, replacing the current Fiscal Management (Responsibility) Act No. 3 of 2003 (FMRA).

Unlike the current FMRA, the proposed FMA is specific as to when the government could deviate from fiscal rules under extreme conditions as well as measures in order to bring public finances back to compliance.

 The draft bill has been submitted to President Ranil Wickremesinghe, who is also the Finance, Economic Stabilisation and National Policies Minister. It is shortly expected to be presented to the approval of the Cabinet of Ministers.

The Cabinet of Ministers last May cleared the proposal to draft a new Public Financial Management law.
The proposed FMA is also a key condition of the IMF’s US$ 3 billion Extended Fund Facility.

However, during this week, a debate erupted in parliament over the usefulness of a new law  as the government was alleged to be violating the existing Fiscal Management Act.

In order to reduce government debt to prudent levels, the FMRA, in sec 3(a), introduced a rule limiting the budget deficit to 5 percent of the estimated GDP. 

According to Verite Research, a Colombo-based independent think tank, since adopting the FMRA, the actual budget deficit of the government has consistently violated this rule that was adopted by law.