NATIONAL INSTITUTE OF

MANAGEMENT LAHORE

33rd Senior Management Course

Simulation Exercise – 1
RG-7

“Federal Finance Minister’s Committee on Streamlining the

Implementation of Single Treasury Accounts System for Prudent
Cash Management”

FACULTY ADVISOR: MS. SAMEENA FAYYAZ

DATE: 07 JUNE, 2023
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Composition of RAG - 7
Sr.No. Name Group/Service
1. Mr. Tajammal Abbas Rana PMS(Ex-PCS)
2. Mr. Muhammad Suhail Khawaja PAS
3. Ms. Farhat Ali PCS
4. Mr. Shahid Sattar IRS
5. Mr. Saad Farooqi PA&AS
6. Mr. Munib-ur-Rehman PMS(Ex-PSS)

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Sequence of Presentation

 List of Abbreviations
 Statement of Problem
 TORs
 Introduction
 Research Methodology
 Situational Analysis
 Analysis of Issues & Challenges
 Conclusion & Recommendations
 Action Plan

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List of Abbreviations
AIOU Allama Iqbal Open University NH&MP National Highways & Motorway Police
PCB Pakistan Cricket Board
CGA Controller General of Accounts PEC Pakistan Engineering Council
EOBI Employees Old Age Benefit Institution PD&SI Ministry of Planning, Development &
FBR Federal Board of Revenue Special Initiatives
PM&DC Pakistan Medical & Dental Council
HEC Higher Education Commission Securities and Exchange Commission of
SECP
KPIs Key Performance Indicators Pakistan
Ministries, Divisions, Attached Departments, SBP State Bank of Pakistan
MDAS
Subordinate Offices SOEs State Owned Enterprises
MoF Ministry of Finance SUPARCO Pakistan Space and Upper Atmosphere
Research Commission
NAB National Accountability Bureau TSA Treasury Single Account
NADRA National Database & Registration Authority UET University of Engineering & Technology
VU Virtual University
NEPRA National Electric Power Regulatory Authority
WWF Workers Welfare Fund
NHA National Highway Authority

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SECTION I: INTRODUCTION

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Statement of Problem

Under Cash Management and Single Treasury Rules 2020, federal

government ministries, divisions, attached departments and subordinate
offices were directed to close their bank accounts with commercial banks /
financial institutions and transfer the balance funds to the Treasury Single
Account (TSA) i.e., Central Account no 1 (non-food), with the State Bank
of Pakistan. Despite lapse of three years, the progress in implementation of
reforms and accomplishment of task has remained slow as 90,119 federal
accounts are still out of ambit of TSA. The purpose of research is to
identify what are gaps and how to implement TSA.

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TORs

 Understand Pakistan's cash management system & its

institutional arrangements
 Situational analysis of the implementation of TSA in the FG
 To evaluate the performance of the MoF in implementing TSA
 Identify key Issues & Challenges
 Study international best practices to draw lessons
 To produce doable recommendations supported by an action plan
to address the challenges
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Introduction
 Economic challenges due to fragmented banking arrangements
 Poor Cash Management
 Commercial banks have multiple accounts of MDAS
 90,199 accounts of FG entities with Rs. 1.991 trillion outside TSA
 The introduction of TSA to optimize government Cash Management
 TSA to Improve Debt Management
 For Proper Cash Flow Management

Source: MoF Report, May, 2023

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Treasury Single Account

“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.”

Source: IMF Technical Note and Manual by

Sailendra Pattanayak and Israel Fainboim

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Literature Review

 PFM Act, 2019

 Cash Management & Treasury Single Account Rules, 2020
 Cash Management & Treasury Single Account Policy 2019-2029
 IMF (2017), PFM Reforms-Government & TSA
 IMF (2010), Treasury Single Account Concept, Design & Implementation Issues
 SBP, Financial Stability Review 2008-09
 Another missed target: Pakistan unlikely to fulfill claim of implementing TSA by
year End by Areeba Shahid

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SECTION II: RESEARCH
METHODOLOGY

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Research Techniques

 Exploratory Research
 Primary Data Collection through Interviews & FGDs
 Secondary Data from Articles, Ministries & Departments
 Interviews with Stakeholders & Experts
 Quantitative Analysis
 Qualitative Analysis

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Sources Contacted
S.No. Names Designation S.No. Names Designation
1.  Mr. Ammar Naqvi Accountant General, Punjab 11.  Mr. Mudassar Director Finance, PHA, Lahore
2.  Mr. Tajammal Director General (DAOs), AG Ejaz
Elahi Punjab 12.  Mr. Adeel Bashir Assistant Director, PHA, Lahore
3.  Rana Obaid-ullah Joint Secretary Budget, Finance 13.  Mr. Mansoor Director Finance, Punjab Text Book
Anwer Division, Islamabad Elahi Board, Lahore
4.  Mr. Naseem DG Audit, Petroleum & Natural 14.  Abdul Razzaq Member Finance Committee, PTBB,
Rashid Resources Lahore
5.  Mr. Faisal Rashid Consultant, European Union 15.  Mr. Kashif Allied Bank Limited, Karachi
6.  Mr. Sajjad Azhar Ex, JS, Budget, Finance Division, Hameed
Islamabad 16.  Mr. Amir Butt Deputy Country Head, Public Sector
7.  Mr. Arqam Tariq Special Secretary, Finance Deposits, BoP
Department, Punjab 17.  M. Hakim Ali Senior Vice President, MCB, Lahore
8.  Mr. Masood AS Budget, Finance Department, 18.  M. Akhtar Javed Executive Director, Banking Policy
Nauman Punjab & Regulations, SBP
9.  Mr. Nauman Senior PFM Advisor, Sub National 19.  Mr. Asif Rasheed Special Secretary, Finance
Yousuf Group, Punjab Department, KP
10.  Mr. Rasheed Section Officer, Treasury, FD, 20.  M. Waqar Paras DS Budget, Finance Division,
Punjab Islamabad

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SECTION III: SITUATIONAL
ANALYSIS

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Historical Evolution of TSA

 Articles 78 and 79 of the Constitution provide for the

formulation of the FCF
 Articles 118 and 119 of the Constitution for the regulation of the
custody of the PCF
 Both deal with Payment & Withdrawals of moneys into FCF &
PCF
 The TSA was introduced in Pakistan initially in the year 2008
 The PFMA, 2019 empowered FG
 Consolidate cash and bank balances into a TSA by SBP
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Historical Evolution of TSA …Contd.

 Cash Management & Treasury Single Account Rules, 2020

 To improve financial management, transparency
 To consolidate government funds
 Various Government Directives, Circulars, & Notifications
 Guidance on TSA-linked accounts, consolidation of
government funds,
 Reporting requirements

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Policy & Institutional Arrangement

 Execution of equitable economic & financial policies

 Economic development & macroeconomic stability
 MoF is responsible for implementation of TSA
 SBP is regulator of commercial banks
 Monetary and credit system of Pakistan
 Optimal utilization of monetary resources

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Policy & Institutional Arrangement ..Contd

 Cash Management & TSA Policy 2019-29

 Federal Cabinet approval on 03-06-2019
 To save interest costs and management of government’s cash
flows efficiently
 Benefits debt management, & monitory policy
 Cash Management & TSA Rules, 2020

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TSA Implementation at Provincial Level

 The Public Finance Management Act, Punjab, 2020

 Khyber Pakhtunkhwa Finance Act, 2019
 Sindh Public Finance Management Act, 2019
 Baluchistan Public Finance Management Act, 2020
 Relevant rules subservient to law are under consideration
 Progress made by the provinces is not very encouraging

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 Impact of TSA on Cash flow in Pakistan

Centralized Payment by the Treasury from the TSA

Central Bank
Treasury
Budget Unit TSA
Payment Order (MOF)
Reconciliation

either
or

Commercial
Recipient
Payment Banks

Source: IMF Working Paper, 2010 21

Impact of TSA on Cash flow in Pakistan

 The fragmented System converted into an integrated System

 Integrated Public Revenue Mobilization & Expenditure
 Reduced Borrowing Cost
 Fair Cash Forecasting
 Reconciliation of Numerous Accounts
 5 billion came into FCF

Source: Ex JS Budget, FD
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Analysis of Entities outside the ambit of TSA
PKR PKR
Group Group
(in billion) (in billion)
Defence 839.506 NADRA 33.475
Atomic Energy
Commission 224.387 Finance Funds 29.230
NHA 161.290 BISP 27.103
Courts and Tribunals 106.310 Civil Armed Forces 18.824
Other MDA 93.446
Universities 88.830 Hajj Deposit 18.397
Other Educational PCB 18.302
Institutes 52.406 HEC 18.299
SUPARCO 43.564
Disaster Management 38.636 FBR 17.182
AIOU 37.012 NAB 12.899

Source: JS Budget Finance, June 2023

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Analysis of Entities outside the ambit of TSA
PKR PKR
Group Group
(in billion) (in billion)
Retirement Funds (EOBI,
WWF) 12.223 UET 4.998

Other Service Providers 11.695 PM&DC 3.995

SECP 2.590
PEC 10.489
NEPRA 2.299
Commercial SOEs 7.656 Civil Services Academy 0.361
NH&MP 7.569 Other Sports Boards 0.254
District Administration 5.938 Pakistan Sports Board 0.222
VU 3.695
Privatization Commission 5.751
PD&SI, National Endowment QAU 2.708
Scholarships 5.524 Total 1967.07

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Source: JS Budget Finance, June 2023
Analysis of Entities outside the ambit of TSA

 MoD has highest amount of deposits

 Disclosure issue of Security related Entities
 Autonomous bodies out of ambit due to peculiar laws
 Overriding Effect of Certain Laws
 Issue of Financial Viability
 Issue of Sustainability of Commercial Banks

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 A small number of accounts hold bulk of the deposits
900
830
 90,119 accounts hold deposits of 800

700
PKR 1.991 trillion (SBP; Sep 2022) 624
600
514
 10,338 bank accounts (11%) hold 500

98% the deposits 400

PKR Billions)
300
 Remaining 79,781 (89%) have only 200

2% of the deposits 100

25
0
 Value for time in focusing bank
accounts with deposits above a
threshold (say PKR 5 million)

Source: MoF Report, May 2023

27% of these deposits yield no returns to the respective entities

Source: MoF Report, May 2023

Almost 77% of Deposits held by only 5 Banks
Bank Name; Deposit (PKR bn)
Others;
281.826977
 NBP (39%) MCB;
845384;
14%
45.7425648
598; 2%
 Askari Bank (19%) BAFL;
67.0056; 3%

 HBL (8%) JS Bank;

74.3475088 NBP;
311821; 4% 771.319953892;
UBL; 39%
 ABL (6%) 96.8236857
845294; 5%

 UBL (5%) ABL;

108.673236
534529; 6%
 NBP holds 90% current HBL;
152.099455
33843; 8%
account deposits
Askari;
369.22757889791; 19%

NBP Askari HBL ABL UBL

JS Bank BAFL MCB Others
Source: MoF Report, May 2023
Only 10 Divisions/Entities hold over 70% of the deposits
Type of Deposit (PKR bn)
Division / Entity
Current Savings TDR Total
Defense 85.04 349.51 278.30 712.85
Atomic 165.15 28.01 6.74 199.91
NHA 59.58 101.71 - 161.29
Selected MDAS* 52.10 46.30 19.65 118.05
Courts 17.45 8.85 68.48 94.78
SUPARCO 17.41 15.48 5.41 38.31
Fauji Foundation - 18.88 15.06 33.94
NADRA 1.44 17.35 14.63 33.42
NAB 12.85 0.05 - 12.90
FBR 9.07 0.24 0.30 9.61
420.09 586.38 408.57 1,415.04
* Selected MDAS include Ministry of Social Welfare, Finance Division, Religious Affairs, PM Secretariat, Privatization Commission
Source: MoF Report, May 2023
Analysis of Focused Group Discussions, Zoom
meetings
 Issue of Cost of Transaction
 Disbursement Limit Options
 Centralized vs Decentralized System
 Single Unified Account vs Several Linked Accounts
 Phasing under TSA-1 & TSA-2
 Only Rs. 5 billion transferred so far
 Option of Sweep-in Sweep-out

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 Analysis based on Semi-structured interviews

Sr.
Question Results
No.
1 Whether Treasury Single Account Fully Agreed Partially Agreed Not Agreed
reforms are essential for improvement 80 % 15% 5%
of cash flow in Pakistan?
2 What is the progress of TSA Slow Medium Fast
implementation in Pakistan? 70 % 25% 5%
3 What are the major hurdles in Legal Administrative Technological
implementing the TSA? 70% 15% 15%
4 What type of structure of TSA is Centralized Decentralized Mix of both
suitable in Pakistan? 60% 10% 30%

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PESTL Analysis

Political Economic Social Technological Legal

Wrong Perception Limitations of soft Need of amendments in

Lack of Cost of
about freezing of interface with respective laws of
Political will implementation
accounts smaller banks entities
 
Loss of profits Lack of trust,
Ineffective Overriding effect of
Political for the banks & Cultural
Accounting tool TSA Laws
Instability entities impediments
   
   
Facility of
Change in Laws of Autonomous,
Cost of Reliance on Electronic
Policy Judicial and Security
transactions traditional mode Accounts
  Organizations
 
 

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Stakeholders’ Analysis Matrix

Stakeholder Impact Influence What is important How could the Strategy for engaging the
Name to the stakeholder? stakeholder contribute stakeholder
to the TSA reforms

 
Ministry of   Maintaining cash Monthly meeting of
High Steering and guiding
Finance High balance steering committee
 
    Ensuring stability of  
State Bank of
    inflow and outflow Regulating the flow of Weekly meeting
Pakistan
High High of balances cash balances
Commercial Maintaining Surrendering cash to Information and feedback
High High
Banks Profitability Single Account daily every week
Weekly Progress Review
MDAS Medium Medium Ensuring Operations Swift Implementation
Meetings
Reviewing legal
Ensuring Monthly Review Meeting
Autonomous framework and
High High availability of with MoF and concerned
Bodies cooperating with the
liquidity ministries
Government
Proper accounting
Establishing accounting Monthly meeting of
CGA Low Low and auditing
framework accounts committee
framework

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International Best Practices
 The RG studied the various successful models of TSA
Countries with TSA
France The TSA includes balances of local authorities municipalities and quasi-governmental
bodies as well as central government and spending department

United Kingdom All central government cash balances are aggregated into a TSA at the central bank

Australia TSA is for the national government. The central bank is the manager but departmental
payments are executed through the commercial banking system

United States The TSA is a consolidated pool for all the funds of the federal government
Sweden Decentralized structure of TSA
India Federal and State governments

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Contextualization and Lessons Learnt
 Best practices for successful implementation in the local context

Area Indicator India Sweden

  Several
Consolidated account
  Federal Centralized Distributed linked
Structure States Decentralized accounts
Distributed accounts
Outside TSA
Reduced borrowing cost Sweep in &
Upgradation of IT
Efficiency Sweep out
Improved cash flow infrastructure
Daily basis

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SECTION IV: ANALYSIS (of ISSUES &
CHANLLENGES) & FINDINGS

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Issues and Challenges …Contd.

 Legal Challenges – Discrepancy in Laws

 SUPARCO Rs. 43.564 bn
 Sec 12 of SUPARCO Ordinance, 1981 allows opening of account
 No explicit power to invest.
 NADRA amount of 33.47 bn in 60 accounts
 Under Section 26A of NARDA Ordinance, surplus money to be
returned to FCF.
 Account Opening permission but no power to invest

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Issues and Challenges …Contd.

 Disaster Management Rs. 38.636 billion.

 Section 29 (4) of NDMA Act, 2010 permits opening in scheduled
banks
 No Power to invest
 Punjab Curriculum &Text Book Board
 Lahore Board of Intermediate and Secondary Education
 Account Opening is allowed

6/16/23 38
Issues and Challenges

 Administrative Challenges
 Data fragmented
 Profitability of commercial banks
 No centralized control of MoF
 Lack of Coordination
 Technological Challenges
 Absence of IT interface/Portal at MoF
 Uniform mechanism of RTGS of SBP with Banks

6/16/23 39
Conclusion

The government of Pakistan has implemented TSA but its

implementation has hit snags due to legal discrepancies,
technological limitations and operational difficulties. It can be put
on track with focused intervention in problem areas in order to
reduce borrowing costs and for efficient and effective cash
management.

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SECTION V: WAY FORWARD

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Recommendations

 The MoF should conduct a survey to identify and segregate

existing accounts held by public entities and assess the cash
available. Only revenue accounts and those receiving grants
from the government are required to be brought in TSA.
 The government needs to review laws to ensure that
autonomous entities and public sector companies are allowed to
open savings and term-deposit accounts in commercial banks, or
else they could be barred or compensated with interest.

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Recommendations

 The MoF should develop an online portal to monitor cash balances

and assess cash forecasting and borrowing needs can be assessed
timely.
 The MoF should actively pursue government entities to include them
in the TSA. At federal level, 10 entities with the highest amounts in
banks are brought into TSA first through Sweep-in, Sweep-out
mechanism.
 The MoF should collaborate with provincial finance departments to
strengthen the consolidated cash balance.
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Strategy Formulation

 The TSA Process has been rolled out, but there are still gaps in
implementation
 A strategy devised to bridge these gaps
 Starting from scratch in 2020
 Currently some accounts closed, Rs. 5 bn transferred
 To include 10 federal entities having 70% of deposits i.e., 1415
billion in commercial banks

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Vision & Mission

 Vision

 To reduce debt and debt servicing cost of Govt. of Pakistan

through prudent financial management.

 Mission

 To integrate public sector accounts of 10 major entities into

Central Account No. 1 through TSA within 2 years.

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Action Plan
Recommendation 1: There is a need to review laws of autonomous entities and public sector companies

Goal 1: Discrepancies in laws of entities with Finance Act to be removed

Sub-Goals Targets KPIs Executing Agencies Timeframe Costing

Laws and rules of

1.1 To identify
all PSEs to be Number of Ministry of Law, 6 months
discrepancies in Rs. 2 million
studied and entities studied Concerned Ministry (Short-term)
laws
reviewed

To amend laws of 1 Year

1.2 To amend Number of laws Ministry of Law,
80% high profile (Medium-term) Rs. 5 million
relevant laws/rules amended Concerned Ministry
entities

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Action Plan
Recommendation 2: Ministry of Finance should develop an online portal

Goal 2: To develop a portal for online monitoring and cash forecasting

Sub-Goals Targets KPIs Executing Agencies Timeframe Costing

No. of variables
2.1 To establish an 100% completion 6 months
for analysis SBP, NITB, MoF Rs. 5 million
online portal of task (Short-term)
added into portal

2.2 To develop IT
No. of entities
based cash 100% completion 1 Year
brought into fold SBP, NITB, MoF Rs. 5 million
forecasting of task (Medium-term)
of mechanism
mechanism

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Action Plan
Recommendation 3: Ministry of Finance should actively pursue government entities for including
those entities into ambit of TSA

Goal 3: To bring balances of entities into TSA

Sub-Goals Targets KPIs Executing Agencies Timeframe Costing

3.1 To bring To bring 100%

Number of
current accounts of accounts into TSA MoF, SBP, 6 months Within existing
current accounts
10 entities into through Sweep Concerned Ministry (Short-term) resources
transferred
TSA in/Sweep out
Within existing
3.2 To bring To bring 80% Number of
resources with
Saving accounts & accounts into TSA saving accounts MoF, SBP, 2 Years
assumption that
TDs of 10 entities through Sweep & TDs Concerned Ministry (Long-term)
no interest is to
into TSA in/Sweep out transferred
be paid.

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Contingency Plan

 MoD/ Sensitive Organizations Resistance

 May be excluded from Action Plan
 Segregate accounts of MoD
 Secret Accounts be excluded from TSA
 Rest of Accounts be included

6/16/23 49
References

 MoF Report, May 2023

 Interview Ammar Naqvi, AG Punjab

 Interview Rana Obaid-ullah Anwer, JS Budget, MoF

 Interview Sajjad Azhar, Ex JS Budget, MoF

 PFM Act, 2019

 Cash Management & Treasury Single Account Rules, 2020

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References

 Cash Management & Treasury Single Account Policy, 2019-20

 IMF (2017), Public Financial Management Reforms-

Government & Treasury Single Account
 IMF (2010), Treasury Single Account Concept, Design &
Implementation Issues
 SBP, Financial Stability Review 2008-09

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 Thank You!

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