The issue of fiscal transparency in Pakistan at times becomes a moot point of public debate where different stakeholders demand to know the basis especially of government decisions involving public money and resources. In the recent past when the cases of sugar, wheat and oil crisis surfaced, the issue of non-transparency in decision making was repeatedly highlighted in electronic and print media. The governments in Pakistan, like other countries of the world, are responsible for provision of public goods and services to the people and in this context, the public sector plays an essential role in our economy. The government of Pakistan spends large sums of public money on a wide range of activities every year pertaining to different sectors to ensure services and infrastructure for its citizens. Resource allocation and its subsequent utilisation on various activities in the public sector is a critical function of each government. Resource constraint is a chronic issue for successive governments in Pakistan due to which they have to deal with competing priorities and any decision making in this situation demands the transparent and efficient use of public funds and resources. Therefore, we need to have a Public Financial Management (PFM) system which should ensure fulfilling the needs of transparency and accountability to enable citizens to understand how public funds are being managed and spent, how decisions are made and also to ensure the availability of information to support decisions. Fiscal transparency denotes the comprehensiveness, clarity, reliability, timeliness, and relevance of public reporting on the past, present, and future state of public finances. Fiscal transparency is a fundamental pre-requisite for establishing public trust in our PFM system because it would provide an opportunity to the citizens and taxpayers to see how and where their hard-earned money is being spent.
Efficient and effective management of public resources requires strong governance and a robust PFM system to track the utilisation of resources and that the funds are appropriately allocated against public policy objectives. Fiscal transparency is all about openness and sharing of information regarding decisions of government involving public resources. Decision-making forums like the Cabinet, the Economic Coordination Committee, ministerial and departmental committees responsible for procurement and utilisation of government funds/resources must maintain information in such a manner where transactions can be tracked down objectively. The government must make efforts and put in place the systems and procedures to achieve the target of ensuring efficiencies in public service delivery, while minimising losses sustained due to waste, fraud or corruption. Fiscal transparency embedded in the PFM system is instrumental in enhancing the quality of decision making and strengthening of accountability. Fiscal transparency in PFM could be ensured apart from other things through three main functional streams; the budgeting process, the accounting and payment system and reporting through audit of public expenditure.
The PFM Act 2019 is aimed at streamlining and reforming the financial management system of Pakistan. The PFM Act provided the broad framework which defined the roles and responsibilities of the Ministry of Finance, the Controller General of Accounts (CGA) and the Auditor General of Pakistan (AGP) in the context of financial management. Direct linkages between good governance and effective social and economic outcomes are acknowledged worldwide and “openness about public policy intentions, formulation and implementation are key elements of good governance”. The budget is an important policy document of the government of Pakistan that reflects and then implements the policy objectives in concrete terms. Budget transparency is defined as full disclosure of relevant fiscal information in a timely and systematic manner. Budget transparency enhances accountability, ensures integrity of public spending and the inclusiveness of different groups, it establishes the public trust and it also enhances quality of budgeting process resulting in better “fiscal outcomes and impactful and equitable public policies”. The Ministry of Finance and the Ministry of Planning & Development, while allocating resources for development and non-development activities, must adhere to the principle of transparency so that the requirement of accountability could be fulfilled. All information relating to financial decision-making needs to be maintained in the most transparent manner in all government entities as this would lead to the strengthening of public trust in our state functioning.
To ensure transparency and disclosure about the availability of public resources, the concept of Single Treasury Accounts (TSA) has been introduced in the PFM Act, whereby each public funds holding entity in Pakistan is obliged to report the position of their cash balances to the State Bank of Pakistan on a daily basis so that an overall position of financial resources could be reflected in the Consolidated Account and the government is able to know its ways and means position. No doubt, the TSA as a disclosure tool would provide a window to the government to have information of available financial resources but at the same time it’s effectiveness needs to be assessed in the context of fiscal decentralisation. To ensure fiscal transparency and improve service delivery, another mechanism envisaged in the PFM Act is the relocation of the payment function at the ministerial level for which the offices of the Chief Finance and Accounts officers (CF&AOs) were to be strengthened and adequately equipped. The PFM Act 2019 through delegation of financial powers has strengthened the role of Principal Accounting Officers in the ministries and departments. Another big step provided in the law is online billing system which would not only ensure transparency but also be instrumental in curbing the corrupt practices in payment offices. Online billing system on pilot basis has been initiated by AGPR and now there is need to expand this system on the basis of lessons learned. The Micro Payment Gateway is another initiative of CGA whereby transparency, timeliness and the accuracy of payments could be ensured through tracking of transactions. The government’s accounting is already being done online by CGA through the SAP system. The monthly, quarterly and annual accounts are prepared on the system and updated information regarding revenues and expenditure of the government is readily available to different stakeholders for their use. However, to ensure completeness and accuracy of financial information there is a need to start asset accounting, leading ultimately towards accrual-based accounting. Transparent financial reporting by CGA organisation is instrumental in the efficient and accurate decision-making process of the government.
The openness and transparency of fiscal information plays an important role in enhancing the government’s governance ability, which is the basis for establishing a modern fiscal budget system. Fiscal transparency also has an impact on the structure and efficiency of public expenditure and helps in avoiding waste, fraud and corruption. A robust PFM system guarantees risk mitigation of waste or abuse of public resources through a strong internal control environment and high-quality independent reporting for the parliament by Supreme Audit Institution (AGP). The quality of AGP’s reporting hinges upon confirming that controls in the public sector entities are operating effectively, identifying waste or inefficiencies of public resources and suggesting ways in which the government can operate better. Apart from commenting on the compliance and control issues of public entities there is a need for value added reporting by AGP to inform the parliament and other stakeholders on issues of service delivery and results and impact of public expenditure. In last two years initiatives were undertaken in the DAGP for paradigm shift from conventional compliance audit reporting to thematic audits whereby a more comprehensive and transparent reporting could be done while highlighting the issues of achievements of objectives and target and their effect on the end beneficiaries. The DAGP is also in process of modernising its processes through the Audit Management Information System (AMIS) which will make the working of DAGP not only more transparent but would also strengthen the internal accountability environment. Therefore, through its financial and performance audit reports the DAGP would be able to build trust in information that public sector entities provide to stakeholders.
The PFM Act 2019 is a big leap towards the strengthening of our financial system, but its success would largely depend on the commitment and devotion of the institutions responsible to implement this law. Continued and concerted efforts on the part of major players would go a long way in ensuring fiscal transparency in financial matters of the government. It is the responsibility of the government to provide the resources to the Ministry of Finance, the CGA and the AGP for ensuring a credible financial management system in which fiscal transparency, good governance and accountability are effectively embedded and implemented. The schemes of Single Treasury Account, relocation of payment function at ministerial level, online billing, rollover of SAP system in defence and railways sectors, value added thematic and performance audit reporting and use of technology to curb malpractices be continued for making our financial management system transparent, responsive and effective. All government entities need to maintain a reliable data bank containing financial and non-financial information to fulfil dictates of transparency in the public sector.