The PFM test

Transparency and accountability are the bedrock of any credible public financial system. They determine not only whether government resources are used wisely, but also whether citizens trust their state to act in the public interest.

In countries where public money is treated as a public trust, economic outcomes tend to improve, corruption declines and institutions operate with greater legitimacy. For Pakistan, a country grappling with fiscal pressures, rising public demands, and global economic scrutiny, transparency and accountability in public financial mechanisms (PFM) are not abstract ideals; they are indispensable tools for national stability.

Public finances shape how a nation raises money, allocates it and turns it into services. Pakistan’s fiscal footprint is massive: the federal budget surpassed Rs14.5 trillion in FY2023–24, and provincial budgets collectively exceeded Rs10 trillion. Yet outputs often fail to match the volume of spending.

Estimates suggest Pakistan loses 8–12% of public expenditure each year due to inefficiencies, leakages and weak controls, while development budgets routinely see 20–40% underutilisation.

These figures reflect a system where decisions are obscured by opacity and repercussions for poor financial management are rare. Without transparency, citizens cannot see; without accountability, institutions need not act.

Recognising these systemic gaps, Pakistan has become a focus area for global partners supporting PFM reforms. The European Union's Public Financial Management Support Programme (PFM-SPP) is one of the most influential initiatives, modernising budget structures, enhancing data accuracy and improving fiscal transparency in Sindh and Balochistan.

The EU's support has helped provincial governments adopt IT-based budgeting, transparent appropriation structures and more citizen-accessible financial reporting. Such reforms offer a foundation for long-term accountability.

The World Bank, too, has invested heavily in strengthening Pakistan's financial governance. The Public Financial Management and Accountability to Support Service Delivery Project enhances internal controls, audit capabilities and reporting systems.

Meanwhile, the Punjab Resource Improvement and Digital Effectiveness (PRIDE) programme, worth over US$304 million, focuses on digitising revenue systems, strengthening procurement transparency and reducing fiscal risks. Punjab's shift toward digital payment systems and e-procurement has already begun reducing manual interventions that historically created opportunities for leakages.

Other international partners have played equally significant roles. The Asian Development Bank (ADB) has supported Pakistan’s fiscal reforms for over a decade, particularly in public-sector management, procurement modernisation and revenue mobilisation. 

The ADB's technical support has helped develop medium-term budgetary frameworks and strengthen fiscal discipline at the federal and provincial levels. As Pakistan continues facing tight fiscal space, the ADB’s policy-based lending tied to governance reforms has become crucial.

The International Monetary Fund (IMF), though primarily known for macroeconomic stabilisation, has increasingly emphasised transparency and accountability in fiscal governance as core conditions for support. Recent IMF programmes require Pakistan to improve public disclosure of debts, state-owned enterprise (SOE) losses, procurement contracts and fiscal risks. The IMF's push for better reporting of ‘circular debt’, pension liabilities and guarantee portfolios is forcing reforms that Pakistan can no longer delay.

The United States Agency for International Development (USAID) has long invested in financial and institutional strengthening, especially through revenue administration reforms and support to provincial finance departments. USAID has helped digitise taxpayer services, improve audit training and strengthen provincial budget systems, particularly in KP and Sindh, promoting more effective public spending.

The Foreign, Commonwealth & Development Office (FCDO), formerly DfID (UK), has also been a leader in public finance reforms in Pakistan. Its governance programmes have supported evidence-based budgeting, public expenditure tracking and strengthening of accountability institutions such as public accounts committees. The FCDO's impact is visible in programmes that improved budgeting transparency and enhanced financial reporting quality.

Germany's GIZ has focused on capacity building, audit strengthening, tax administration and anti-corruption measures. GIZ-supported initiatives have helped train financial managers, standardise audit methodologies and develop fiscal reporting tools aligned with global best practices. Japan’s JICA has contributed to system modernisation, including financial compliance training and support for digital transformation in government departments.

Collectively, these reforms have already begun reshaping Pakistan's PFM landscape. But the real test is whether this momentum will be institutionalised. With debt servicing consuming nearly 57% of federal revenues and development needs expanding, Pakistan cannot afford structural inefficiencies; every rupee saved through transparency becomes a rupee available for public welfare. 

Digitised procurement alone can save up to 20 per cent of procurement costs, a margin that could translate into Rs400 billion annually — more than the federal education development budget.

Equally important is the credibility Pakistan gains internationally when PFM systems are robust. Investors and development partners prioritise transparency, audit quality, competitive procurement and rule-based budgeting.

Countries with strong PFM frameworks secure financing on better terms, attract private investment and maintain steadier macroeconomic conditions. In this sense, transparency is both a domestic reform and a global economic strategy.

To fully benefit from ongoing reforms, Pakistan must evolve from merely complying with technical requirements to embracing a cultural shift. Budgets must be published in formats that citizens understand. Real-time dashboards showing project expenditures and procurement contracts must be publicly accessible.

Audit reports must be made available without delay and acted upon. Procurement must be fully digitised and competitive. Performance-based budgeting must replace historical allocation patterns. None of this requires new laws; it requires steadfast enforcement and political will.

Accountability must also be strengthened. Audit findings should lead to investigations, not be shelved.

Performance gaps must trigger corrective action. Financial misconduct must carry consequences, regardless of political affiliation. Oversight bodies, including public accounts committees, finance departments and auditor general offices, must be empowered. Whistleblower protections must shield those who expose corruption.

Ultimately, transparency and accountability extend beyond government. The media must report financial matters factually. Civil society must track budgets. The academia must analyse fiscal trends. Business associations must advocate for transparent taxation and procurement. Citizens must demand to know how their money is spent.

If Pakistan succeeds in embedding transparency and accountability across public financial mechanisms, supported by the EU, World Bank, ADB, IMF, USAID, FCDO, GIZ, JICA and others, the transformation will be profound: reduced corruption, efficient spending, improved service delivery and renewed public trust.

A transparent system lets the public see; an accountable system ensures institutions act. Pakistan’s financial future depends on strengthening both, not episodically, but consistently, and with unwavering commitment.

The writer is a public policy expert and leads the Country Partner Institute of the World Economic Forum in Pakistan. He posts @amirjahangir and can be reached at: [email protected]

Disclaimer: The viewpoints expressed in this piece are the writer's own and don't necessarily reflect Geo.tv's editorial policy.

Originally published in The News