IMF Finds Massive Problems in Pakistan’s Budget Making Process

The International Monetary Fund (IMF) has found massive problems in Pakistan’s budget-making and execution processes with deviations of up to 55 percent in the FY2022-23 budget compared to actual expenditures. These deviations are largely attributed to supplementary grants approved without prior parliamentary scrutiny and thus caused financial instability, reported TheNews. According to the IMF’s Technical Assistance Report: Budget Practices, Pakistan’s frequent use of supplementary and technical grants has led to substantial in-year adjustments. In FY23, these grants totaled Rs. 1,910 billion, causing the current budgets to peak at 54.7 percent over original allocations. Pakistan’s fiscal challenges have been worsened by mounting public debt which is sucking out 60 percent of revenue in interest payments, alongside external shocks like 2022’s unprecedented floods. Policy slippages have further strained the fiscal position. The lender has advised fiscal restraint, including converting the FY23 primary deficit of 1.3 percent of GDP into a surplus for FY24. To address these challenges, the report recommends things like enhancing Pakistan’s Public Financial Management (PFM) system and improving budget preparation and execution. IMF said there is poor coordination among institutions which has caused inefficient dual budgeting complications and fragmented Finance Division operations. The IMF has emphasized the need for balanced solutions to streamline budget flexibility while maintaining legislative oversight, as exemplified by the 2023 caretaker government’s restraint in using supplementary grants. The report further seeks the adoption of digital technologies and institutional reforms to improve fiscal discipline besides ongoing efforts in debt management, state enterprise oversight, and public investment planning.