Islamabad: The International Monetary Fund (IMF) has recently proposed constitutional amendments to limit the federal government’s ability to issue supplementary grants without prior parliamentary approval, as claimed by a news source on December 19.
According to sources, a technical IMF mission has put forth a set of measures to strengthen Pakistan’s fiscal position, including the restructuring of the finance ministry, identified as having a weak capacity for budget planning and execution. Finance Minister Dr Shamshad Akhtar was briefed on these preliminary findings after the completion of a two-week review of Public Finance Management (PFM) on Monday.
While some recommendations can be implemented by the caretaker government, crucial ones, such as constitutional amendments, are suggested for the incoming government. The IMF specifically urged an amendment to Article 84 of the Constitution, which allows the federal government to issue supplementary grants without prior approval. The IMF proposes either abolishing this power or implementing an upper limit linked to parliamentary approval.
For the current fiscal year, where expenditures may exceed the approved budget, the FM informed the IMF about the potential increase in debt servicing costs. The IMF’s call for constitutional amendments may face challenges, as it requires a two-thirds majority in both houses of Parliament.
The IMF also recommended establishing a contingency fund for emergencies and conducting a special audit by the Pakistan Auditor General to evaluate the effectiveness of supplementary grants issued over the past decade. The IMF identified instances of arbitrary and excessive use of authority in issuing such grants, leading to a total that nearly reached 15% of the annual budget sanctioned by the National Assembly.
Furthermore, the IMF opposed technical supplementary grants, which transfer funds between budget heads without an additional budgetary burden, undermining budget credibility. Amendments to the Fiscal Responsibility and Debt Limitation Act 2005 were also suggested to enforce the statutory limit of keeping public debt below 60% of GDP.
In line with the IMF’s suggestions, Pakistan has committed to achieving a primary budget surplus of 0.4% of GDP for the current fiscal year under the USD 3 billion bailout package. The IMF also proposed measures to enhance budget execution, including issuing combined ceilings for current and development budgets.
Additionally, the IMF stressed the need for stronger coordination within the FM and recommended improvements to the budgeting process, including making the Macro and Fiscal Policy Unit (MFPU) functional. The IMF also raised concerns about an inefficient dual budgeting system contributing to an inflated development spending program. Issues with Budget Call Circulars were highlighted, calling for clearer guidelines.
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