IMF finds fault with Pakistan’s uplift framework

ISLAMABAD: The International Monetary Fund (IMF) has ranked Pakistan’s development framework lowest on the basis of five major flaws out of a total of 15 categories evaluated by the Public Investment Management Assessment (PIMA).

The IMF has assessed that fiscal rules have had little impact in containing expenditure in the last 10 years and the debt limit has often been breached. Highlighting the major flaws, the IMF pointed out that the current and development budgets are prepared by separate ministries. The law does not require autonomous bodies to report their own source of funded projects. On lack of effective monitoring of projects, the IMF says that the requirement to maintain asset registers is not enforced and outlays on fixed assets but not depreciation are shown in financial statements.

“Five-year planning was stopped in 2018 and existing plans are not costed and they lack measurable outcomes. There is a missing link from goals to plans, so it is not possible to know how Public Sector Development Programme (PSDP) projects are helping to attain national goals,” the IMF report states on PIMA.

The IMF has divided Pakistan’s development paradigm into three major categories including Planning, Allocation, and Implementation of Public Sector Development Program (PSDP) at the federal level. According to the Technical Assistance (TA) report prepared by the IMF on PIMA, on account of fiscal rules and targets, the law contains fiscal and debt targets and a medium-term fiscal framework is required to guide the budget process. The IMF has termed its effectiveness as low and pointed out that fiscal rules have had little impact in containing expenditure in the last ten years and the debt limit has often been breached. The IMF termed coordination between entities falling in the medium ranking and stated that a strong coordination mechanism exists between federal and provincial governments. It pointed out that the requirements to report on contingent liabilities are still under development. The coordination mechanism works well in practice though volatility persists. Work is underway to improve central oversight of public-private partnerships (PPP) and state-owned entities (SOEs).

The IMF has found project appraisal of the PSDP projects as medium ranking and says that rigorous appraisal is required for budget-funded projects with central support, however, appraisals are not published for external review. The projects are returned for improvement, but full processes are not yet operational, says the IMF. It termed alternate infrastructure financing as medium and stated that regulations support competition in major markets and multiple PPP frameworks are in place. However, the centralized monitoring for SOEs was recently regulated.

The IMF has termed multi-year budgeting ranking as medium and says that the budget documents project three-year funding and total costs of PSDP projects, but no multi-year ceiling is set for ministries/sectors. The multiyear projections are close to future allocations but tracking the evolution of costs of major projects is difficult.

It also ranked Pakistan as low on account of budget comprehensiveness and said that the current and development budgets are prepared by separate ministries. The law does not require autonomous bodies to report their own source of funded projects. The IMF says that commitments are not recorded. Ongoing projects receive significantly less funding than needed to be completed on time.

With some exceptions, the IMF points out that the standard methodologies for estimating maintenance needs are pending, although those expenses must be identified in the budget. In practice routine and capital maintenance levels shown in the budget are considered inadequate to retain asset values.

In the project selection process, the IMF identified that major projects are reviewed centrally for selection but no published selection criteria are in place. The pipeline of approved projects exists. The cash is provided as expected, but releases are used to control expenditures.

Data on donor project accounts is available. A well-structured monitoring system is established. The reallocation of funds is loosely regulated. Standardized ex-post reviews include lessons learned. The implementation plans are required and processes for major project adjustments and ex-post external auditing are in place.