The International Monetary Fund (IMF) has identified significant issues in Pakistan’s budget-making and execution processes, revealing that deviations from the approved budget reached a record 55% in the 2022-23 fiscal year due to supplementary grants.
The findings were outlined in the IMF’s Technical Assistance Report on Pakistan’s Budget Practices, emphasizing the need for stronger fiscal institutions and reforms.
The report highlighted that changes in the size and composition of expenditures, largely through supplementary and technical grants approved without prior parliamentary scrutiny, undermined budget credibility.
In FY23, supplementary grants alone accounted for 21.9% of the approved budget, with deviations in development and current expenditures peaking at 54.7%.
The IMF noted that Pakistan’s fiscal challenges are exacerbated by rising public debt, which consumes 60% of budgeted revenues for interest payments, along with unbudgeted subsidies, external shocks, and policy delays. The government now faces the task of converting a 1.3% primary deficit into a surplus for FY24 while maintaining essential social and development expenditures.
The report proposed reforms to improve macro-fiscal forecasting, enhance budget preparation, and ensure stricter execution controls. It criticized Pakistan’s fragmented budgeting practices, which lack clear guidance, fiscal constraints, and coordinated oversight. The inefficient dual budgeting system and outdated budget call circulars were cited as additional weaknesses.
On execution, the IMF flagged the executive’s excessive reliance on supplementary grants, which accounted for 14% of approved spending in recent years, alongside another 13% from technical grants. It called for a balanced approach to emergencies requiring legislative approval and comprehensive mechanisms to prevent overspending and arrears accumulation.
The report also recommended leveraging digital technologies and strengthening the Public Financial Management (PFM) system to address these challenges. It pointed to progress in areas such as state enterprise oversight, debt management, and the Treasury Single Account but stressed that reforms must focus on effective budget monitoring and transparency to restore fiscal discipline.
