IMF back in action: Asks Pakistani govt to indicate risks to its fiscal position

JAVED MAHMOOD
KARACHI – International monetary Fund has said that a fiscal risk statement should be issued as part of the budget 
papers. The Fund said that the elements of fiscal risk are covered in the present budget documents, but no summary 
overview of potential risks to the government’s fiscal position is provided. 
IMF further said that risks arising from explicit and implicit contingent liabilities, such a risk statement should cover 
macroeconomic risks arising from changes to key macroeconomic parameters, such as price, interest, or exchange rate 
and also provide an analysis of control risks, based on an examination of original budget estimates versus actual budget 
outcomes.
The IMF has raised this issue in its report, Pakistan Observance of Standards and Codes-Fiscal Transparency Module-An 
Update. The update was prepared by a staff team of the International Monetary Fund as background documentation for 
the periodic consultation with the member country. It is based on the information available at the time it was completed 
on April 4, 2008. The Fund further said that the Personal Ledger Accounts and assignment accounts should be completely 
replaced with NAM compliant alternatives as soon as possible. The regulations to replace PLAs and assignment accounts 
should be implemented as soon as possible to strengthen reporting and control.
The Medium Term Budgetary Framework implementation is following an ambitious rollout plan. A unified classification 
derived from the existing COA will build on the present system and support the top-down allocation process. 
The FAD staff suggests that the present budget classification permits evolution to a more focused program approach 
which will help to address a number of critical long-term change issues. Operational “programs” so defined would 
incorporate both development and recurrent budgets relevant to that function element.
It would help to unify the development and recurrent budget processes-”new proposal submissions” for programs should 
be evaluated in a similar way to development projects, but cover both capital and recurrent spending; Eliminate 
crossover problems when the development phase of a project is complete and recurrent costs are transferred to the 
revenue budget; Provide a framework that applies to all ministries, allowing a more phased approach to establishment of 
effective budget management by line ministries; Provide a framework that applies to all levels of govt.
redefinition and harmonization of the roles of the Planning and Development Division (PDD) and the Budget Wing of the 
MOF.
IMF further mentioned in the report that given the expected improvement in availability of data, it should be possible in 
the near future to meet the fiscal transparency code requirement that the budget and MTBF estimates should (in addition 
to the MTBF out-years) show actual outcomes for two years previous and provisional data for one year previous to the 
budget year. 
Allied to this, the budget documents should include summary tables showing original budget versus actual outcomes over 
several years.
Fund said the clear technical specifications for calculation of out-years will both improve the efficiency of budget 
preparation and improve transparency and accountability of the budget. Specification of technical parameters (such as 
price) and policy for the estimates will permit an analysis of factors causing changes in the estimates in the following 
year-most importantly, separating price changes from introduction of new policies. In turn, this will limit the need for data 
entry to establish baseline ceilings for following years’ budgets, since the first out-year can be automatically entered as 
data for the next budget year in the roll-over process.

Source: Tne Nation, 24/4/2008