South Asia - Pakistan NWFP: Public Financial Management

Pakistan - North West Frontier Province: Public Financial Management and Accountability Assessment

Report Summary:

The North West Frontier Province of Pakistan has performed reasonably well since the last Public Finance Management and Accountability Assessment (PFMAA) was conducted in 2004.

Facts:

- Per capita income in NWFP, the third largest province in Pakistan, is 30% lower than the country’s average.
- The province is under-developed and growing at an economic rate unequal to the population growth rate.
- Reconstruction costs of over $1.5 billion to recover from a devastating 2005 earthquake are a heavy burden on resources.

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Summary Assessment

Overall, the North West Frontier Province (NWFP) of Pakistan has performed reasonably well since the last Public Finance Management and Accountability Assessment (PFMAA) was conducted in 2004. The province scores high on account reconciliations, audit quality, participation and orderliness in budget process, and level of transparency in the fiscal transfer mechanism. But the analysis also highlights the need for reforms in specific areas of budget development, budget execution, accounting, external audit, and legislative oversight -- deficiencies that impact aggregate fiscal discipline, strategic allocation of resources, and efficient service delivery in the province.

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Chapter 1: Introduction

This PFMAA was conducted jointly by the World Bank, EU, DFID, and ADB, with the cooperation of the Government of NWFP, and in line with the PFM Performance Measurement Framework issued by the Public Expenditure and Financial Accountability (PEFA) Program. This chapter lists the six core dimensions of the framework that measure PFM performance, outlines the methodology behind the assessment, acknowledges the people and organizations that contributed to the study, and makes a note of the scope and limitations of the analysis.

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Chapter 2: Background Information on NWFP

A severe earthquake in 2005 left the under-developed NWFP in continued need of relief and reconstruction. This has meant budget re-prioritizations and a need for additional mobilization of resources. The revenue and expenditure characteristics of the state’s budget and the legal and institutional PFM framework of the province are discussed in this chapter. A new NWFP Local Government Ordinance which requires that financial management be decentralized has made little progress because of confusion over the interpretation of rules, regulations and powers.

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Chapter 3: Assessment of Public Financial Management (PFM) Performance

A detailed review of PFM in NWFP, against each of the indicators set out in the PEFA framework, is presented here. It describes the processes related to the indicators, identifies issues where necessary, and provides assessments against a four level rating for each indicator. The credibility and realism of the state budget, tax collection and assessment, the pace of review of audit reports, and the functioning of the zila accounts committees are key weaknesses in the PFM system of NWFP, says the report.

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Chapter 4: Government Reform Process

NWFP was not the first province to embark on a comprehensive reform program but it has sustained the process. The Government is taking action to implement the key elements of the public financial improvement plan agreed under the Structural Adjustment Credits from the World Bank. The report recognizes this and other efforts by describing recent and on-going reform measures in the NWFP which may not yet have impacted PFM performance. It also briefly reviews the institutional factors supporting reform planning and implementation.

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