ISLAMABAD: The International Monetary Fund (IMF) has asked Pakistan for initiating legal changes, required to limit the discretionary powers granted to the federal government over the use of supplementary grants, while maintaining some flexibility in budget execution.
The Fund stated that Pakistan stands as an exception in terms of the National Assembly’s oversight regarding the practice of supplementary grants, which deviates from good international practice.
The Fund has also recommended for request the auditor general to undertake a special audit on the mechanism, efficiency, and effectiveness of supplementary grants over the last 10 years.
Strategy aimed at re-appropriation, more allocation of funds notified
The Fund in its “technical assistance report-improving budget practices” urged the government for reviewing the various stages of commitment controls to make them comprehensive and aligned with international good practices and redesign the budget execution process accordingly.
The IMF stated that fiscal transparency code18 advises that “any significant amendments to the total budgeted expenditure should necessitate a supplementary budget beforehand. The Code further defines advanced practice as requiring “a supplementary budget ahead of any substantial changes to the total budgeted expenditure or its composition”.
The report noted that there is a strong rationale for requiring prior approval by the legislature which extends beyond the need for transparency and accountability. It allows the legislature the opportunity to examine and assess proposed changes to the budget in a similar manner to its initial scrutiny of thep roposed annual budget. It provides a crucial check to ensure a disciplined budget preparation process and to mitigate policy slippages during its implementation.
Conversely, frequent reliance on methods that alter budget allocations without the legislature’s input can lead to suboptimal macro-fiscal forecasts, inadequate costing of public policies, ineffective budget preparation, and relaxed control over the implemented budget by the Ministry of Finance.
Due to these concerns, many countries have adopted the practice of seeking their National Assemblies’ prior approval for supplementary spending.
The Fund noted that notwithstanding the Supreme Court’s final and binding judgement supporting the ex-ante approval of supplementary grants, relevant laws and rules can be amended to ensure greater certainty and clarity on its interpretation and application.
In 2019, a Constitutional Amendment was proposed to the Senate, aiming to revise Article 84 to require prior resolution from the National Assembly before the approval of supplementary grants, except in cases of emergencies.
The bill failed to secure the necessary Constitutional majority for passage. There may be other mechanisms through which the Supreme Court judgement can be enshrined. This could include amending the PFMA (e.g., Article 10) and the General Financial Rules 2019 (Rules 96-196), and/or reinstating the principle of ex-ante approval of the GFR.
Copyright Business Recorder, 2024