Govt implements mechanism for fiscal integrity, discipline

ISLAMABAD: The government has notified a fresh mechanism for annual and multi-annual financial commitment controls for all ministries, divisions and their attached departments and subordinate offices, except the Ministry of Defence, to improve the integrity of the budget and fiscal discipline.

“Expenditure arrears from the previous financial years are a major source of fiscal indiscipline and poor budget credibility in the government. These arrears build up because of the absence of an effective system of commitment control due to which government offices incur expenditure without matching allocations to discharge their liabilities,” said the Ministry of Finance while issuing a fresh notification.

Finalised in consultations with the Auditor General of Pakistan as required under Public Financial Management Act 2019 pushed by the international lending agencies, the finance ministry said the notified guidelines were meant “to minimise the build-up of expenditure arrears in the government and help improve fiscal discipline and budget credibility.

These guidelines would be applicable to all ministries, divisions, executive departments, public entities and offices established and controlled by the federal government receiving grant-in-aid or public money from the federal government. There would be an exemption to the Ministry of Defence because of its peculiar arran­gement under which defence allocations are a one-line transaction. It may make similar arrangements for defence services, if required, with the concurrence of the finance division.

Exemption provided to Ministry of Defence

Under the guidelines, annual commitments shall be recorded for both recurrent and development budgets for procurement of goods, services and carrying out civil works. These commitments shall be recorded when there is a properly authorised obligation, a contract or purchase order, to make a future payment against a budget allocation with a value of rupees one million or more.

This would also be applicable to goods and services for which the amount of transaction is known, the supplier has been nominated and a relevant officer has authorised the contract for procurement of goods, services or for civil works or a legal contract or purchase order has been entered with supplier.

The officer sanctioning or authorising a contract for procurement of goods, works, services above the thres­hold of rupees one million shall be personally responsible for communicating the commitment to the respective accounting office within one week of approving the contract using a specimen form. The concerned accounting office shall be responsible for recording the commitment in accordance with the provisions of the Accounting Poli­cies and Procedures Manual (APPM) within one week of receiving the request from the sanctioning officer.

The commitments will be reconciled among all the accounting offices. The Accountant General of Pakistan Revenue (AGPR) will provide to Finance Division, on a monthly basis, a summary statement showing consolidated commitments and monthly cash requirements of all divisions, departments and offices.

Financial Accounting and Budgeting System (FASS) and RAAST Instant Payment System shall be used by the accounting offices for commitment control in accordance with the instructions issued by the Controller General of Accounts (CGA) and State Bank of Pakistan (SBP).

Under the guidelines, annual commitments shall be adjusted when the payment is made and all annual commitments shall lapse along with the budgetary allocation at the end of a financial year.