The Finance Division has notified a new procedure to streamline the budgeting and accounting of capital expenditure, introducing a standardised system for fund classification and improved financial reporting across government divisions.
According to the notification, the revised framework aligns with constitutional provisions and the General Financial Rules (GFR) to ensure consistency and transparency in public spending. Citing Article 80 of the Constitution, the division emphasised that the federal government is required each fiscal year to present a statement of estimated receipts and expenditures to the National Assembly, distinguishing between charged expenditures and other proposed expenditures from the Federal Consolidated Fund.
The notification clarified that under GFR 134, expenditure of a capital nature refers to spending intended to increase permanent, tangible assets or to reduce recurring liabilities such as future pension obligations. Temporary or short-term spending, by contrast, cannot ordinarily be classified as capital expenditure.
It added that capital accounts will bear all charges related to the initial construction and equipment of a project, while ongoing maintenance and operational costs will be charged to revenue accounts. Expenditure arising from extraordinary events such as floods, fires, or other calamities will be treated as capital or revenue depending on the government’s decision in each specific case.
To standardise financial reporting, the Finance Division announced that fund codes will be used to reflect the nature of expenditure in both current and development budgets. Fund Code FC11 will apply to voted current expenditure on capital account, while FC12 will cover development expenditure on capital account. Similarly, FC21 will represent current revenue expenditure and FC22 will correspond to development revenue expenditure.
The notification also stated that funds for civil works, previously managed by the Pakistan Public Works Department (PWD), have now been transferred to the relevant divisions for execution through agencies such as the Capital Development Authority (CDA). It clarified that Public Sector Development Programme (PSDP) allocations will also be classified as capital expenditure, except for those related to capacity-building activities or projects that do not create new assets.
The Finance Division said the new procedure aims to strengthen fiscal discipline, enhance financial transparency, and ensure that all capital-related spending is correctly reflected in the federal budget in line with constitutional and accounting standards.
