« IMF’s PFM Online Course to Open Year-Round | Main | Why PEFA Does Not Need a Gender Budgeting Framework »

April 25, 2019

How to Improve Financial Accountability in Pakistan

Posted by Muhammad Akram Khan[1]

Public financial management (PFM) arrangements in Pakistan perpetuate a system that the colonial rulers designed for effective control of taxes collected from the local populace. Globally, PFM concepts and practices have changed significantly since then, but very little in Pakistan. They fail to recognize that public managers should be accountable for the resources they manage, or that the PFM systems should generate reliable financial and performance information besides exercising robust internal controls.

PFM practices currently applied in Pakistan have three major weaknesses. First, though line ministries can make routine expenditures, they require approval of the Ministry of Finance (MoF) for re-appropriations and many non-routine expenses. Second, line ministries have no role in the making of payments and the preparation of accounts. Third, ministries do not report systematically on their financial and operational performance. Consequently, managers have little incentive to improve efficiency in service delivery and have diluted accountability for the management of resources.

The Auditor General of Pakistan (AGP) has a vast mandate but faces severe resource constraints. Thus, it cannot focus on issues of national significance such as the energy crisis, the anti-terrorism program, effective management of water resources and waste, the efficient procurement of oil, air planes and defense equipment, and other pressing policy issues.

Proposed accountability framework

The existing accountability framework cannot hold all public managers accountable on a timely basis. Here are some key elements of a modified accountability framework that could be implemented over a period of years with enormous benefits for efficient financial management.

  • The MoF should hand over most responsibilities for the control of expenditure to line ministries. Heads of divisions, known as Principal Accounting Officers, should manage their budgets, make payments and maintain accounts independently. The MoF should be mainly responsible for preparing budgets and cash forecasts and arranging funds for the spending agencies.
  • Line ministries, operating as independent payment and accounting units, should hold bank accounts with the central bank and submit their cash requirements to the MoF each month, after considering their operational plans and approved budgets. Staff working in the government’s many accounting offices should be transferred to line ministries for managing payments and accounts. Ministries should report on their performance against predetermined indicators.
  • The Parliament should consider creating a Performance Measurement Commission (PMC) for approving performance indicators, data collection procedures, and formats of performance measurement reports of line ministries as well as provinces and districts.
  • The role of the Controller General of Accounts should be limited to preparing and consolidating the government’s financial statements and managing pension, provident and other public funds. Most staff currently working for the Accountant General should be transferred to the newly-established accounting units in line ministries.
  • The Parliament should create an office of Chief Internal Auditor under the Prime Minister. This office should take over the function of compliance auditing currently performed by the Auditor General. Provincial legislatures should create a similar system at provincial and district levels. The Chief Internal Auditor should submit audit reports to the Parliament for consideration by the relevant Public Accounts Committees (PACs).
  • At all levels of government, there should be about 4-5 PACs, each with 3-5 members, as against the existing single PAC of 20 members in the federation and similar numbers at the provincial level. At the federal level, for example, each PAC would focus on, say, 7-10 line ministries, and examine reports issued both by the Auditor General as well as the Chief Internal Auditor.
  • The Auditor General should be the auditor of the federation only, with similar offices being established at the provincial level. At district level, a new office known as the District Audit Authority should be established. These bodies would be responsible for the certification of financial statements and performance measurement reports of line ministries and districts. The existing methodology and guidelines for performance audit would need to be modified.


The proposed accountability framework would enhance accountability at all levels. Line ministries, departments and districts would have full authority for budget management with improved accountability for results. The new framework would encourage managers to generate information on their performance. The Auditors General would have more resources and capacity to undertake performance audits as well as their routine financial audits. Auditing at district level would be strengthened by establishing independent audit offices. The PACs would be able to review audit reports in a shorter span of time.

The new framework would require fundamental changes in the Constitution and laws at all levels of government. Senior politicians would be required to exercise strong leadership. Rules of business in federal and provincial governments would also require substantial changes, together with a huge effort to develop new technical and managerial skills and capacities, and IT systems. It would take a period of at least 3-5 years to implement the new framework which, however, could be broken down into a series of smaller steps. Development partners could be invited to provide financial and technical support for the new systems.

[1] Formerly Deputy Auditor General, Pakistan, Additional Secretary, Economic Affairs Division, Pakistan, and Chief Resident Auditor of United Nations Peacekeeping Missions. 

Note: The posts on the IMF PFM Blog should not be reported as representing the views of the IMF. The views expressed are those of the authors and do not necessarily represent those of the IMF or IMF policy.


Verify your Comment

Previewing your Comment

This is only a preview. Your comment has not yet been posted.

Your comment could not be posted. Error type:
Your comment has been saved. Comments are moderated and will not appear until approved by the author. Post another comment

The letters and numbers you entered did not match the image. Please try again.

As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.

Having trouble reading this image? View an alternate.


Post a comment

Comments are moderated, and will not appear until the author has approved them.

Back to top of page
©2007 IMF. All Rights Reserved. About Us | Terms of Use
/************* DO NOT ALTER ANYTHING BELOW THIS LINE ! **************/ var s_code=s.t();if(s_code)document.write(s_code)//-->