Posted by Muhammad Afnan Alam[1]
Pakistan's legal and institutional framework for PFM is evolving. However, substantial gaps arise between projected and actual expenditures and revenues, thus reducing the predictability of the budget and necessitating in-year adjustments in budgetary appropriations. Many other weaknesses in the PFM system still exist and its overall performance is suboptimal by international standards.
In June 2019, Pakistan's Parliament approved a new Public Financial Management Act which was amended in June 2020. This Act was designed to improve the performance of the country’s fiscal institutions. Key provisions include: publication of a budget strategy paper at the beginning of each budget round and mid-year budgetary performance reports; the establishment of a Treasury Single Account (TSA); and setting up an internal audit function within line ministries. The June 2020 amendment contains an additional chapter on policy formulation and administration of non-tax revenue. It also binds the government to place a report before Parliament commenting on the government’s performance in delivering its targets on the the delivery of public services.
Recent progress in improving PFM
Related developments
The impact of the COVID-19 crisis in Paksistan has proved to be quite a test for Pakistan's PFM framework. It has revealed how many reforms were far from being well-entrenched. It has also encouraged the government to engage in activities and transactions that cloud the actual state of its public finances. The PFM Act, though not fully comprehensive in its scope, creates an opportunity to change many of these discouraging trends and practices.
[1] Muhammad Afnan Alam is a career civil servant at the Government of Pakistan and can be reached at afnanalam@gmail.com
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