The International Monetary Fund (IMF) has identified nine major shortcomings in Pakistan’s public financial management system, cautioning that weak budget oversight and governance gaps are undermining fiscal discipline. In response, the government has assured the lender that it is taking tangible steps to enhance transparency and curb corruption.
IMF Report Highlights Key Concerns
According to the IMF’s “Corruption and Diagnostic Assessment Report,” Pakistan’s public investment system is suffering from several serious defects. The Fund raised alarms over project delays, escalating costs, and the inclusion of politically motivated schemes in the Public Sector Development Programme (PSDP) without proper procedure. The report also flagged risks in multi-year budgeting, noting that limited oversight increases opportunities for corruption.
Call for Stronger Budget Monitoring
The IMF stressed that strict budget monitoring is essential for enforcing fiscal discipline. Ministries, including finance, planning, and the Federal Board of Revenue (FBR), along with other stakeholders, have briefed the Fund on the progress made to address these weaknesses. Further discussions on the proposed reforms are expected during the IMF mission’s upcoming visit to Pakistan.
Government’s Response and Reforms
In response, Pakistani authorities informed the IMF about multiple measures being taken to improve governance. These include:
- The establishment of a Financial Monitoring Unit (FMU).
- Mandatory asset declarations for civil servants and bureaucracy.
- Prioritizing the rapid completion of foreign-funded and ongoing projects.
- The closure of 344 slow-moving projects valued at Rs2.518 billion.
- The launch of a digital transformation process to ensure transparency in high-risk projects.
- The introduction of an intelligent project automation system within the Ministry of Planning.
Officials emphasized that these reforms are aimed at preventing the misuse of funds, combating corruption, and strengthening accountability.
IMF Pushes for Revenue and Governance Reforms
Sources say the IMF has also been informed of measures to improve tax revenue and curb corruption. While the IMF welcomed the government’s commitment, it insisted that sustained implementation would be key to restoring financial discipline. The IMF has pointed out that only 2% of funds have been allocated for new development projects, against the prescribed limit of 10%.
Lack of Project Prioritization
Another critical gap highlighted by the IMF is the lack of prioritization in development projects. The Fund noted that approved projects often fail to secure necessary funding, leading to inefficiency, overlapping initiatives, and inflated costs. It also observed the use of non-competitive procurement methods. The IMF urged Islamabad to restructure its investment framework to ensure that resources are directed toward high-impact projects.
According to officials at the Finance Ministry, the release of the IMF’s “Corruption and Diagnostic Assessment Report” has been delayed due to the progress being made in improving the financial system. The report was initially scheduled for release in July and then in August. It is now expected to be discussed during the IMF mission’s visit to Pakistan this month.
