ISLAMABAD - Following recommendation of the International Monetary Fund (IMF), the federal government is planning to prepare multi-year indicative budget ceilings on the overall development budget, starting from the Fiscal Year 2024-25 (PSDP), instead of the existing annual based development budget ceiling strategy.
Similarly, the Planning Commission will also make it obligatory to obtain independent security of major project proposals, including around cost estimation and increase transparency of project appraisal documents, as recommended by IMF, official source told The Nation.
The government is working on adoption of action plan recommended under IMF technical report on Pakistan Public Investment Management Assessment (PIMA) and Climate PIMA.
IMF in its technical report on investment allocation has pointed towards the issue of the budget framework which does not establish a strong basis of the planning and execution of capital expenditure. It was recommended to set multi-year indicative budget ceilings by the ministry.
It has been planned to prepare multi-year indicative budget ceilings on the overall development (PSDP) budget. A bottom-up approach (based on existing PSDP commitments) should complement the current top-down approach based on resource availability. Finance Division should also indicate the split between the current PSDP and the space available for new projects. Use multi-year indicative budget ceilings to prepare multi-year ceilings. These ceilings should be included in the Project Call Circular.
Similarly it was also recommended that examine scope to reduce the within year adjustment of capital expenditure (including restricting the ability to add new projects through supplementary grants or virements). The planning action on the part of the Finance Division is to review rules to restrict the ability of agencies to fund projects not formally approved as part of the budget Review rules for supplementary grants for development projects.
Another issue pointed out was pertaining to the insufficient information on the investment budget. It was recommended to improve transparency by presenting in budget documentation summary information on key aspects of the PSDP. The action under consideration includes to develop the format and location of the presentation in budget documents. Include this summary information using the new format in the FY24-25 Budget.
To further strengthen the appraisal of the projects, IMF had recommended for continuation plans to obtain independent security of major project proposals, including around cost estimation and increase transparency of project appraisal documents.
The Planning Commission will work to determine which projects should be subject to scrutiny by independent experts.
Similarly, another issue pointed out regarding substantial investment undertaken by autonomous entities that are not subject to ordinary investment procedures should they use their own revenue. It was recommended to formalise processes to obtain information on projects funded from sources other than the PSDP and present aggregate information on the public sector investment program in the budget showing major federal projects and their costs regardless of financing source.
Now the Planning Commission will review powers to obtain information on investment projects across funding sources and identify any needed legislative amendment.
It was also recommended to implement the central monitoring system for SOEs and establish guidance for oversight/information exchange on SOE investment plans.
The Finance Division will put in place mechanisms for reporting on SOE fiscal risks related to public investments eg PPPs and other contingent liabilities by September 2024. Subject to development of SOE ownership policy, put in place mechanisms for coordination on SOE projects of national significance