As part of a collaborative effort to reclaim fiscal space lost under the 7th National Finance Commission, the federal government has inked agreements with the four provinces to achieve a combined fiscal surplus of at least Rs600 billion by the end of this fiscal year.
The move is aimed at curbing further debt in critical sectors such as fertiliser, wheat, and other essential commodities.
The Ministry of Finance has reported this development to the International Monetary Fund (IMF), emphasizing the commitment to stringent fiscal discipline.
In the initial quarter (July-September) of the fiscal year 2023, provinces collectively reported a modest surplus of Rs51 billion, with Punjab and Khyber Pakhtunkhwa facing deficits.
However, in the subsequent quarter (October-December), the federal government, under the IMF program, secured around Rs290 billion in surplus from the provinces.
The Ministry of Finance has informed the IMF about improved fiscal coordination through updated Memorandums of Understanding (MOUs) with the provinces.
Punjab has committed to curtail its expenditure by Rs115 billion for the remainder of FY24 to achieve the committed surplus associated with the budget.
Provinces have also agreed to address the decade-long accumulation of commodity debts by implementing time-bound plans for their timely retirement.
In addition to refraining from increasing commodity debt, provinces have committed to adopting a definition of provincial surpluses according to the Government Finance Statistics Manual (GFSM2014), an IMF reporting template.
While the federal government has taken measures to contain spending, the IMF notes that additional efforts are required to ensure the primary surplus goal of Rs400 billion budgeted for the current fiscal year.
Provinces have amended MOUs to align with agreed-upon surplus targets, and the Punjab government has committed to restricting spending to achieve the specified surplus.
To further strengthen budget preparation and execution, the government has requested IMF technical assistance.
The recently completed Climate-Public Investment Management Assessment (C-PIMA) provides an action plan to enhance public investment management to address climate challenges.
Moreover, provinces have embraced the e-Pakistan Acquisition and Disposal System (e-PADS) for electronic procurement, fostering transparency in public procurement.
The federal government is also collaborating with provinces to reduce electricity subsidies, particularly for tube wells, targeting subsidies that predominantly benefit large agricultural users.
