IMF identifies flaws in Pakistan’s budget process

With differences of up to 55% between the FY2022-23 budget and actual spending, the International Monetary Fund (IMF) has discovered significant flaws in Pakistan’s budget-making and execution procedures.

The IMF’s recent report on Pakistan’s budget practices highlights serious issues with financial instability, largely due to the frequent use of supplementary grants without prior parliamentary approval.

In FY23, these grants reached Rs1,910 billion, pushing the current budget 54.7% over initial allocations.

This financial instability has been compounded by rising public debt, consuming 60% of the country’s revenue in interest payments.

External shocks, such as the devastating 2022 floods, have further strained the fiscal position. The IMF has advised the government to implement fiscal restraint, aiming to turn the FY23 primary deficit of 1.3% of GDP into a surplus for FY24.

To improve the situation, the IMF recommends strengthening Pakistan’s Public Financial Management (PFM) system, improving budget planning and execution, and enhancing coordination between institutions.

The IMF also calls for digital reforms, debt management improvements, and better oversight of state enterprises.

While the 2023 caretaker government showed restraint in supplementary grants, the IMF stresses the importance of maintaining legislative oversight while streamlining budget flexibility for future stability.